Corporate complicity in human rights

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The Enron Corporation: Corporate Complicity in Human Rights Violations has been written by Human Rights Watch. Human Rights Watch conducts systematic and regular examination of human rights abuses in seventy countries around the world. Human Rights Watch defends freedom of idea and expression, a vigorous civil society and due process and protection of the law. They document and accuse murders, torture, disappearances, discrimination, arbitrary imprisonment and other abuses of internationally recognized human rights. Its objective is to hold governments accountable if they transgress the rights of their people.

Human Rights Watch began in 1978 with the start of its Europe and Central Asia division. Today, it also includes divisions covering Africa, Asia, the Americas, and the Middle East. It includes three thematic divisions on arms, women's rights and children's rights. It maintains offices in New York, Lon Angeles, Washington, London, Moscow, Brussels, Rio de Janeiro, Dushanbe, and Hong Kong. Human Rights Watch is a non governmental and an independent organization, supported by aid from private individuals and foundations worldwide. It accepts no government funds, directly or indirectly.

Human Rights Watch's duty is to protect human rights and its advocacy and research on corporate responsibility is shaped by these concerns alone. Human Rights Watch takes no position on trade or development policies. But in a unified world where very large and important transnational corporations compete for new markets limited resources, trade and human rights are gradually more intertwined. Companies that trade in important commodities oil, gas, or electricity illustrate this phenomenon.In current years, the energy industry has been involved in controversy because of its assumed participation in situations of human rights violations all over the world.

Another energy company that warrants concentration is the Enron Power Development Corporation, a subsidiary of the Houston-based Enron Corporation, which is one of the world's largest energy companies. Traditionally view as an oil and natural gas company; it began to develop electricity projects for its natural gas in the early 1990s. In 1997, its annual revenues are more than U.S. $20 billion.

This book focuses on a Dabhol Power Corporation (DPC) which is the subsidiary of the Enron Development Corporation in India. The DPC's project in the state of Maharashtra forms the largest single foreign investment in India. Since 1992, its history raises questions inherent to any serious discussion of the importance of human rights concerns to governments and companies design investment strategies.

From its beginning of 1992 through 1998 the development of the Dabhol Power project the huge influence that Enron exercise over the central and Maharashtra governments; to give details about the company's communication with villagers whose genuine concerns for their livelihood and environment were unnoticed or dismissed leading them ultimately to oppose the project; to make clear that various avenue to address their concern about the project judicial proceedings and direct dialogue with the company had been tired in ways that raised questions rather than answering them. The local resistance that formed to protest the project's lack of transparency, its danger to villagers' livelihoods, its human impact, and its potential to do environmental harm was the affected population's last recourse.

In 1992, the government of India announced that it would open up the power and electricity sector to foreign investment. A senior Indian government delegation during May and June 1992 met with Enron officials and announced that the company was interested in building a power plant in India.

On June 10, 1992, almost immediately after the delegation trip, the Indiangovernment informed the Maharashtra State Electricity Board (MSEB) that a group of Enron officials was coming to survey land for a proposed power project. Five days later, representatives of Enron and General Electric arrived in New Delhi and met with officials of the central government about the proposed project. A Memorandum of Understanding (MoU) with the state government was signed on June 20, 1992, to build the Dabhol Power project.The operating entity would be known as the Dabhol Power Corporation (DPC), a joint venture of Enron, General Electric, and the Bechtel Corporation. In the eyes of the public, the DPC was Enron, and it is often referred to as "Enron," "the Enron project," or "the Enron Power project."

Public are opposed to the pricing of power and the project. It is linked to dollars.Forty years ago, four rupees equaled one dollar. When the project was signed, thirty-two rupees equaled one dollar. Today, thirty-eight to forty rupees equals one dollar. With Enron's tariff, only chemical industries can survive which will destroy the environment and survival of people. Engineering, electrical, and heavy industries cannot afford to pay the price charged by Enron.

The state government has invoked several laws to restrict peaceful expression and assembly in Ratnagiri and surrounding districts. These include provisions under the Bombay Police Act, the Code of Criminal Procedure, and the Indian Penal Code. The Bombay Police Act and the Code of Criminal Procedure have been regularly used to criminalize group demonstrations against the Dabhol Power project and to prevent individuals whom the police perceive as leaders of protests from entering the districts where opposition is active. The Indian Penal Code has been used to charge individuals known as leaders of anti-DPC protests with criminal offences as serious as attempted murder, which carries a maximum sentence of life imprisonment, even when there is little or no evidence that these individuals were involved in a crime. In several cases, these arrests have been coupled with the use of excessive force by police in the form of beatings with lathis, fists, and sticks.

Beginning in 1994, when construction of the Dabhol Power project began in Ratnagiri, local farmers, shop-keepers, fisher people, politicians, and other residents of the district staged protests against it. Protests ceased in 1995 through the end of 1996, because construction at the site was suspended due to the cancellation of the project by the Shiv Sena-BJP government.

There are no international regulations on transnational corporations (TNCs) that force them to respect human rights. The first international attempt to regulate corporations was the International Labor Organization's (ILO) adoption of its Tripartite Declaration of Principles for Multinationals and Social Policy in 1977. The principles detailed the responsibilities of TNCs to operate in a manner consistent with international human rights and labor rights laws.

More than 90 percent of NGOs surveyed reported that transnational corporations must be responsible for: ensuring proper working conditions, including nondiscrimination; respect for freedom of association and collective bargaining; prohibitions on forced and child labor; complying with national laws; and avoiding illegal or illicit activities such as corruption.

Human Rights Watch believes that the financiers of Phase Iand the U.S. government agencies involved in lobbying for the project. The U.S. government bears special responsibility because of its forceful, aggressive lobbying on behalf of the three U.S. based companies developing the project; and because it extended hundreds of millions of dollars in public funds for the project.

Human Rights Watch also believes that the institutions which agreed to finance Phase II need to implement adequate safeguards to ensure respect for human rights in order to avoid responsibility for human rights violations. In particular, these institutions should demonstrate their clear commitment to respect human rights by addressing the legal prohibitions on freedom of expression and peaceful assembly which are still in force; the fact that many of the cases against activists are still pending; and the fact that the company receiving funding (DPC) has made no attempt to correct its practices and ensure respect for human rights, but rather continues to benefit from the abuses.

In previous reports, Human Rights Watch has called for governmental and private financial institutions to condition financing for projects on measurable compliance with human rights. In the case of the Dabhol Power project, because of the complexities and numerous actors involved in financing, Human Rights Watch investigated the role of financial institutions for Phase I of the project to determine whether any safeguards existed to monitor or condemn human rights violations. They also examined the actors responsible for financing Phase II.

When financing for Phase I of the project was planned, the involvement of multilateral development banks, primarily the World Bank, was considered crucial to the project's success. The World Bank, however, refused to fund the project. The World Bank's analysis was telling that the price of power generated by the project is too high.

Enron was undeterred by the World Bank's refusal to fund the project or negative reports appearing in the Indian media. While a group of private foreign investors, led by the Bank of America and ABN Amro, provided approximately $150 million, and another group of Indian banks, led by the Industrial Development Bank of India, provided $95 million, political risk insurance and loan guarantees came from the U.S. government's Overseas Private Investment Corporation (OPIC) and Export-Import Bank (Ex-Im Bank) institutions financed by U.S. taxpayers. OPIC contributed approximately $100 million in political risk insurance, and the Ex-Im Bank extended a loan guarantee of approximately $290 million in late 1994.

On June 16, 1998, the secretary of state for the United States government, Madeleine Albright, outlined the goals of United States foreign policy, in a speech to the Senate Appropriations Committee:"We all agree that the United States is, and should remain, vigilant in protecting its interests, careful and reliable in its commitments and a forceful advocate for freedom, human rights, open markets and the rule of law."

In the case of the Dabhol Power project, it seems that the government of the United States acted asa powerful advocate for open markets at the cost of human rights and the rule of law. Throughout the development and implementation of the Dabhol project, U.S. government officials and various governmental agencies including the Department of Energy, Department of State, Department of Commerce, and Central Intelligence Agency consistently lobbied the Indian government heavily on behalf of the companies.

The Overseas Private Investment Corporation and the Export-Import Bank of the United States put together $400 million in financing.When the agreement was suspended by the newly elected Shiv Sena-BJP government in 1995, the U.S. Department of Energy issued a very strong statement threatening that the project's cancellation would seriously put at risk U.S.-India relations and India's ability to attract foreign investment.

The Indian government has committed to provide for the first "fastâ€'track" projects are essential to move those projects forward and establish a strong track record with international investors. While they recognize the need to limit the number of such guarantees, it will take time to bring alternative financing packages to market. The first of these power projects, Enron's Dabhol Project, has already reached financial closure and is under construction, sending a positive signal to international investors about the future of the Indian market.

Given the stated goals of U.S. foreign policy, the fact that this is a project of U.S. companies, and the Overseas Private Investment Corporation (OPIC) and the Ex-Im Bank have labor rights and human rights conditionality's placed on their financing, respectively,it would be reasonable to assume that equal concern would be accorded to human rights. The Overseas Private Investment Corporation is required to address labor rights in the course of its lending.

In the case of the Dabhol Power Corporation, the Ex-Im Bank is required to consider human rights broadly in its financing packages. Since Enron received between $290 and $300 million in U.S. government loan guarantees for the Dabhol Power project, the State Department was required to conduct a human rights impact assessment. The assessment was conducted by the U.S. Embassy in India, which provides the State Department with information on the human rights situation within the country.

As the ambassador and head of the U.S. Embassy in India, Mr. Wisner-in stark contrast to his role as advocate for Enron's commercial interests was silent on the issue of human rights. When asked former Ambassador Wisner about the human rights violations that took place in Maharashtra related to the Dabhol Power project in 1997, he responded: Look into the facts carefully about "protests." They were not protests local villagers didn't like the amount of money they got from Enron in compensation and wanted to get more from the company. I do not know about the record of the Maharashtra police and don't know whether there were any human rights violations. I am not aware of what went down in the village. If you think there are human rights violations, you should go down to India and get the facts. If you want to know about human rights, talk to the Maharashtra Police. I don't know anything about the protests and suggest that you go to India and find out. Why do you want to talk to me?

It is a matter of serious concern to Human Rights Watch that the former ambassador appears to have given no consideration to human rights violations. It suggests a willingness on the part of the United States government to discount human rights when commercial interests are at stake.

Human Rights Watch filed a Freedom of Information Act request to obtain all documents referring to the human rights review of the Dabhol Power Project.They received a confirmation of their request by the Ex-Im Bank, dated July 23, 1998.Later, they received the impact assessment and a letter from the Ex-Im Bank. In a letter dated October 1, 1998, informing us that there were no other documents concerning human rights in relation to the loan guarantee. The State Department's impact assessment itself is minimal.It states, in its entirety, "The State Department has no objection to this case on political grounds or on the basis of human rights issues."

A human rights impact assessment conducted in 1994-1995 could not have predicted violations in 1996-1998 but in 1993-1994, demonstrations and reprisals had already begun. Moreover, the complete lack of interest, as in the case of Mr. Wisner, the highest ranking State Department official in India; the complete lack of knowledge, as in the case of the general counsel's office of the Ex-Im Bank; and the complete lack of information, as the impact assessment obtained from the Ex-Im Bank illustrates, demonstrate that human rights was not a consideration for the U.S. government. This apathy continues to have relevance now, as financing is arranged for Phase II of the project.

With an estimated cost of $1.5 billion and a capacity of 1,440 megawatts, Phase II of the project is slated to be almost twice the size of the $920 million, 740 megawatt Phase I. Initially, the same actors, primarily the U.S. government's Export-Import Bank and OPIC as well as private investors, were expected to finance Phase II. Ex-Im Bank, for example, could have extended up to $500 million for the second phase of the project. OPIC and Ex-Im Bank involvement, however, was suspended in May 1998 because of the underground nuclear tests that India and Pakistan had recently conducted. President Clinton imposed sanctions against India and Pakistan prohibiting the extension of all non-humanitarian aid and trade programs, including OPIC and Ex-Im Bank financing. Enron's response was that, "as a company doing business in India, we were not and we are not in favor of sanctions." The company predicted that sanctions would be lifted by the end of 1998.

The absence of OPIC and Ex-Im Bank financing created serious problems for Phase II planning. Later, the company would reassure investors that sanctions would not affect the construction of Phase II of the Dabhol Power project. With the nuclear tests, OPIC and Ex-Im funding has been suspended. Enron is not as big as other oil companies and cannot finance projects of this size off their balance sheet, so they have to rely on financing like OPIC and Ex-Im.

Enron scrambled to handle the setback, announcing on September 1, 1998 that it had secured $1 billion in financing from international commercial banks. The company obtained a $200 million loan guarantee from the Export-Import Bank of Belgium and $50 million from the Export-Import Bank of Japan (J-Exim) as part of the $1 billion financing package. The company also announced that $300 million would be obtained from Indian banks, led by the Indian government's Industrial Development Bank of India. The State Bank of India announced an "in principle" agreement to loan $150 million for Phase II of the project. On November 9, 1998, the Indian government's Industrial Finance Corporation provided an $83 million loan for Phase II. The State Bank of India and state-owned Industrial Development Finance Corporation announced their intent to loan $100 million for Phase II. The Indian government, however, did not extend a counter guarantee for Phase II. Following the announcement that it had secured financing, the company said that it would begin construction of Phase II in the fourth quarter (October to December) of 2001.

None of the institutions that have agreed to finance Phase II have human rights conditionality's in general, or anything comparable to OPIC and Ex-Im policies, to regulate their transactions. Nevertheless, Human Rights Watch considers that because of the abuses which occurred during the construction of Phase I and the existing prohibition on freedom of expression and peaceful assembly in Ratnagiri district, no financial institution can avoid responsibility for human rights violations if it finances Phase II without appropriate safeguards to protect human rights.

On November 7, 1998, the U.S. government "eased" sanctions against India and reauthorized OPIC and Ex-Im Bank funding for projects in India, but at this writing it is unclear whether the company will try to secure U.S. government funding.

The Dabhol Power project is not located in an unstable or conflicted area, nor is DPC a partner with a repressive government. India is the world's largest democracy, with a vigorous civil society, a general culture of human rights, legal protections, an active judiciary, and an acceptance of free expression and peaceful assembly. If increased investment necessarily leads to improvements in human rights and respect for the rule of law, then how can the human rights violations as a result of the Dabhol Power project be explained? The conflict that has taken place in Ratnagiri district, indeed, has flowed directly from the conduct of the DPC and the state. Opposition by villagers who saw their lands seized and their waters polluted and diverted also began with, and is attributable to, the requirements of the DPC project. The abuses visited upon dissenting villagers also are traceable to the supposedly beneficial investment by the parent company of DPC, Enron.

The Dabhol Power project may teach a lesson to governments and companies who lobby for business and investment. Unless an explicit and programmatic commitment to human rights exists, respect and protection for these rights will not improve, and may deteriorate, even in countries that are considered democratic and open.