Project assumptions:  national and international regulation of commercial activity – from will to done deal

Idealists among project managers are not a rare species. We want to fix it all, in one go, in a year and within a budget. We pencil in our partners support, commitment and will to respect human rights as firm assumptions. And we proceed, sometimes with a big noisy launching event. I, for one, am guilty on all above accounts.

It’s no news that projects operate in more and more complex environments. When events like the Bhopal industrial accident hit the global news, we start wondering about that complexity, and where on Earth are the traces of the good governance, corporate responsibility and rule of law. Then the question of where are our firm assumptions now crawls in. There are many views on events and project assumptions such as the above. Here are the two cents of mine:147470096

The degree of effectiveness of legal regulation of commercial activity is at the mercy of individual states. Given that the role of international law is still limited in this regard, those in countries with poor governance substantially remain disadvantaged in a global market.

The objectives at a project design phase would be to explore the development of the legal regulation of commercial activity on a national basis and consider the limitations of this for multinationals operating in a global market. The effectiveness of domestic legal regulation in this area needs to be considered, along with limitations of any international approach to the issue. The industrial accident in Bhopal and the extractive industry in Nigeria could be considered among relevant case studies.

Projects designed for Commercial activity have repercussions on fundamental human rights, including the ‘right to life’. More people are killed worldwide by industrial accidents and diseases each year (2.2 million) than are killed in wars (Slapper, 2011). With the progress of globalization the effectiveness of individual jurisdictional safeguards against crime, projects designs need to embed the understanding that financial malpractice and health and safety dangers become severely attenuated, because risk can be simply shifted to the jurisdiction of least resistance (idem). As a consequence, hazardous enterprises move into developing parts of the world, with daunting consequences. This was the case of the defective chemical plant in Bhopal.

The Bhopal case study is illustrative on a number of accounts, showing an interplay between projects and public policies.  It shows that such projects can have a far-reaching and detrimental impact on people and on the environment. It provides insights into Government and corporate behaviors, important for stakeholders analysis. The company in question was able to distance itself from the operations of its subsidiary in India. This was also possible due to a certain reluctance of and procrastination on behalf of the government to enforce laws against it in order to protect their citizens. The fear of discouraging inward investment on the part of multinationals was seemingly among factors explaining the government attitude.

The picture becomes even more complex due to a combination of legal, jurisdictional, political, diplomatic and commercial reasons for which the governments and courts of developed nations rarely hold multinationals based in their countries to account for their foreign misdeeds. The arrest of management with their subsequent release, officials’ press statements condemning the management were soft responses to a tragedy of such a scale. Overall, the success in holding those responsible legally accountable has been limited and adequate financial compensation for the victims has not been achieved in Bhopal case.

In such situations, the question whether the international community can provide more effective protection for the vulnerable through the implementation and enforcement of human rights obligations arises. Governments do adhere to international instruments and international organisations. The government of India was no exception in this case. The Indian government had acceded to the United Nation’s International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR) in 1979 and so at the time of Bhopal the Indian authorities were in theory bound to ensure the implementation of the rights contained in these covenants. These rights include the right to life (Article 6 ICCPR), the right to enjoyment of the highest attainable standard of physical and mental health (Article 12 ICESCR) and the right to an effective remedy (Article 2 ICCPR). India committed to minimum standards for health and safety by being a founding member of the International Labour Organisation (ILO) since 1922. These are all nicely articulated aspirations. The reality is that as it is ultimately the responsibility of each state to incorporate international human rights obligations into national law, and this can be a challenge for the governments of most nations. Political and economic considerations may drive courts and governments into exercising a fair degree of latitude in the implementation and enforcement of these rights, impacting the effectiveness of protection for future generations from the risks of another Bhopal.

The extractive industry is another area to dwell on the effectiveness of regulation of commercial activity. Leading economies rely on oil and gas and this renders oil and gas companies very powerful, leading to an asymmetric relationship between developing countries and these companies. In Nigeria, e.g., this asymmetry is further exacerbated by “administrative neglect, crumbling social infrastructure, high unemployment, social deprivation, abject poverty, endemic conflict (Amnesty International, 2009). Local communities have a double disadvantage: the tremendous wealth generated from oil is not benefiting them and they suffer from the resulting pollution caused by oil spills, dumping of waste and gas flaring. This kind of commercial activity impacts people’s ability to enjoy their livelihoods, as fishing and farming is affected, the soil is contaminated and thus many dimensions of human rights e.g. to health, to food, to water, to a healthy environment, to work get abused (Amao, 2011).

Community complaints were directed not only at the activities of corporations, but also at the government for not effectively protecting their interests as stakeholders and not controlling the multinational corporations in question (idem). The Government in his case was openly siding with the foreign oil companies (deploying military forces to protect their infrastructure and personnel e.g. in return for arms supplied for government security forces). Amnesty International in its 2009 report places the responsibility for the human, environmental and economic damage on the Nigerian government for failure to regulate the oil industry effectively despite the many statuts that potentially give the government the legal muscle to do so. The fact that the government is a partner of oil companies and benefits from their activities leaves people and communities without effective access to redress. Even the legal recourse to protest through the ballot box is more theoretical than real given that patronage, political clientelism and populism are underpinning the system in Nigeria (Oxfam, 2009). The government there needs to first meet basic governance prerequisites to be able to effectively protect its citizens. Greater transparency, operating systems and public institutions to monitor and ensure accountability, a free media are needed for a start. In such circumstances, corporations commitments to “comply with applicable laws and regulations … and… give proper regard to health, safety, security and the environment’ (Shell 2006:6) leave the door open to selectivity and allow them to escape oversight (Amao, 2011).

Nigeria signed the African Charter on Human and People’s Rights and International Covenant on Economic, Social and Cultural Rights. It still does not lead to an automatic and effective enforcement of human rights, as in India’s case above.

States have the duty to protect human rights. It may be ideal, but still aspirational to conclude that government failure to enforce laws or to implement international human rights obligations does not diminish the expectation that corporations honor human rights. And these assumptions need to be subjected to close scrutiny in any related project.

My thanks to Rianne C. ten Veen for the inspiration in the WB822 course at The Open University.

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