Mining in Goa (UK-listed Companies)

Jo Swinson Excerpts

Tuesday 24th February 2015 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

It is a great pleasure to serve under your chairmanship, Dr McCrea.

I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on securing the debate and on taking us through a fascinating, if deeply worrying history of mining in Goa. He clearly has great constituency interest in the matter, as well as a personal one. He outlined details of the damage that can be caused to the natural environment in terms of deforestation, pollution and public health. The impact of corruption on the population is significant and, sadly, not unique to Goa.

Natural resources can be of huge benefit to countries and can be used to improve and develop the economies of those countries blessed with them, if managed well. They can transform poor countries. For example, in 2012, Nigerian oil exports were worth almost $100 billion, which is equivalent to more than the total net aid to the whole of sub-Saharan Africa. In 2007, Botswana became an upper middle-income country, although upon independence back in 1966 it was one of the world’s poorest countries. That success is largely due to well-managed mining revenues from diamonds.

Mining developments internationally therefore have the potential to boost economic growth dramatically and to provide a route out of poverty for resource-rich countries. However, there are also many examples of the temptation of such money leading to corruption and the kind of problems the hon. Gentleman outlined; natural resources can be more of a curse than a blessing for particular countries.

Extractives companies, whether listed or unlisted, are important partners for the Government. We want to make sure that developing countries can make the most of their natural resources to tackle poverty. We are committed to increasing transparency in the sector, encouraging strong, transparent and accountable institutions to regulate extractives properly and promote open markets and societies. We therefore need to facilitate an environment in which resource-rich developing countries and regions can attract responsible investment to help them transform the vast potential that natural resources offer into growth, jobs and development.

During the UK presidency of the G8 in 2013, we secured a commitment to working towards common global standards of extractives transparency. We want to level the playing field for business internationally and provide information for more citizens around the world, so that they can hold their Governments to account for how such resources are used. The G8 also launched eight partnerships, working with companies, Governments and civil society in resource-rich countries to improve transparency and build accountability and capacity to manage resources better. Our work through Department for International Development country offices is helping resource-rich developing countries to derive the maximum benefits from oil, gas and mining projects.

The problems the hon. Gentleman described impact significantly on the human rights of the population of Goa—on their rights to health, clean water and due legal process. As he will be aware, UK-listed companies are already required to report on the human rights implications of their operations. Those reports will be further strengthened under the recently agreed directive on non-financial reporting, which will be in place by 2017 and requires listed companies to include information on human rights in their strategic reports.

High standards of reporting on human rights issues are an inherent part of the UN guiding principles on business and human rights, which were adopted in 2011. In 2013, the UK was the first country to publish an action plan on business and human rights, which sets out the Government’s expectations of business to respect human rights at all times. In December, I was delighted to attend the third UN forum on business and human rights in Geneva, which had a constructive atmosphere with an increased business presence; civil society was very engaged in making the forum a success. UN action on this agenda is now in place and an increasing number of countries—although not yet enough—are producing action plans. We want to encourage work and progress on this agenda in countries around the world.

The UK is showing leadership on the issue; indeed, this evening, I will be launching the UN guiding principles reporting framework, which provides, for the first time, a comprehensive standard for reporting so that companies can be held to account by shareholders and customers. The reporting framework applies to all sectors, including extractives. Newmont Mining is one of five companies that have committed to applying the framework straight away.

The combination of enhanced disclosure in the strategic report and the UN guiding principles reporting framework, which sets the standard for that disclosure, will mean that from 2017 listed companies will be more effectively held to account for the human rights impacts of their operations. For that reason, I am proud of the work this Government have done on human rights.

We are also leading the way on extractives transparency. Back in May 2013, we made a commitment that the UK would sign up to the extractives industry transparency initiative, or EITI. In October, after a lot of work by a multi-stakeholder group, we formally gained candidacy status and will now proceed to produce the first reports. UK corporations have engaged constructively with civil society and Government, and their approach is a real example of how progress can be made. The whole process of EITI is designed to build trust and dialogue, and to put information into the public domain, which then prompts public debate. That can be a useful tool for holding companies to account. To give an example, in the Democratic Republic of the Congo, which is not necessarily renowned for its good governance, the EITI process was the first time different stakeholders sat down around the same table to discuss mining sector management. That kind of dialogue and co-operation can also help to prevent conflict.

Many extractive companies listed or headquartered in the UK are active in supporting EITI; for example Rio Tinto and Shell are part of the multi-stakeholder board I have mentioned. The UK’s intention in signing up to EITI is to show that it is not just for developing countries. We want to show that it is not a case of the UK simply telling other countries what they need to do; we recognise that we need to lead the way. That gives us a much stronger argument in our international discussions on the issue.

In addition to EITI, there is also chapter 10 of the accounting directive, which requires listed and large extractives companies to report the payments they make to all Governments. The Government committed to early implementation of those provisions, and our regulations came into force in December 2014. The Financial Conduct Authority, which the hon. Gentleman mentioned, has also changed its rules to require listed companies that are not registered here in the UK to report, implementing the requirements of the transparency directive. Companies will be required to report their payments to Governments from 1 January this year, six months ahead of the EU’s transposition deadline. We will start to see reports being published during 2016.

Bribery and corruption are barriers to trade and growth. The UK is a signatory to the UN convention against corruption and the OECD bribery convention. The Government published the first UK anti-corruption plan on 18 December last year, bringing together all the UK’s anti-corruption efforts under one cross-departmental plan. The Bribery Act 2010 came into force in July 2011, so a company that carries on business in the United Kingdom can be prosecuted for bribery anywhere in the world. On the other hand, other companies can trade on the honesty and integrity that the Bribery Act implies, bringing a benefit for business.

I am aware of the issues the hon. Gentleman raised about Vedanta in particular. It is important that companies listed in the key financial centre of London, which are therefore UK companies, are held to high standards. Quoted companies have to include information about environmental risk in strategic reports. Of course, some corporate governance failures will not necessarily be addressed purely through shareholders holding companies to account; that is one important route of accountability, but some failures may be so serious that the company and directors are exposed to criminal liability. For example, if a commercial organisation fails to put in place adequate procedures to prevent bribery, it could be criminally liable under the Bribery Act.

It is important to be clear: we expect all UK businesses to comply with all applicable laws and to respect internationally recognised human rights wherever they operate. It is no excuse if an offence is committed in another jurisdiction—a company should not feel that it can get away with behaviour and practices in a distant part of the world that it would not even attempt to get away with here.

Trust and transparency are incredibly important, which is why we have prioritised them as part of our corporate governance framework. Wide-ranging reforms in the Small Business, Enterprise and Employment Bill will enhance corporate transparency and increase trust in UK business. Central to that is implementing a publicly accessible central register of information on the people who ultimately own and control companies—the persons of significant control. We are proud to be leading globally in this space, and are encouraged by the growing international momentum on these issues. For example, the soon to be adopted fourth money laundering directive will require all EU member states to hold company beneficial ownership information in a central register.

It is absolutely right that the hon. Gentleman has raised these serious issues. It is a positive thing that a particular problem in a particular area of the world, or with a particular company and its practices, can be highlighted in this place and a spotlight shone on such activities. He has done that today through this debate on mining in Goa. I hope I have set out that the Government take these issues incredibly seriously and are aiming to be a world leader in transparency and accountability—in extractive mining companies and much more widely—as well as in encouraging businesses to take their human rights responsibilities seriously.

There is no room for complacency. We must continue to promote these issues. There will always be money to be made somewhere in the world by exploiting human rights, but that is unacceptable and we in the UK should have no truck with it whatsoever. That is why it is so important to empower citizens in Goa and elsewhere to encourage the development of strong corporate governance, and to make sure that UK-listed mining companies are able to lead the way on these matters.

Question put and agreed to.