Statement of Peter Rosenblum
Professor, Columbia University Law School
Release of Contracting Out of Human Rights: The Chad-Cameroon Pipeline Project
September 7, 2005

Many countries are engaged in a genuine struggle to improve human rights; others hardly need an excuse to violate them. Pressure to gain foreign investment in competition with other developing countries may frustrate the well intentioned and give new incentive to those who already have little interest in human rights.

For several years before construction started on the Chad-Cameroon pipeline, the pressure was intense. The oil companies, the governments and the World Bank insisted that this project was the only hope, particularly for Chad, a country with few other resources. The legitimate concerns of local and international NGOs were constantly derided, treated as if NGOs alone stood in the way of prosperity and economic development for the region. When NGOs called for a moratorium to better prepare for the project, they were accused -- at a meeting organized by the World Bank -- of taking food from the mouths of starving children.
Under such pressure, countries make concessions -- especially, as in the case of Chad and Cameroon, where government capacity, transparency and democratic accountability are in short supply.

Amnesty International's report documents how concessions are incorporated into agreements between a state and a corporation, and how they threaten legitimate state activities in fulfillment of international human rights obligations.
There are four State-Investor Agreements that Amnesty International evaluated in this report. These agreements bind the governments of Chad and Cameroon for up to 70 years, depending on the agreement and the exercise of extension provisions.
The agreements detail which laws will be complied with and provide that, where national laws and regulations conflict with the terms of the agreement itself, the agreements prevail.

Amnesty International's report draws attention to concerns with "stability clauses," which explicitly give the Consortium broad discretion to decide whether or not to respect laws and government actions that affect the contracts.

The language is sweeping. For example, the 2004 agreement prohibits the state from applying any governmental action that directly or indirectly 'aggravates' the 'obligations or charges' under the agreement or, even more vaguely, has the effect of 'undermining the rights and economic advantages of the Consortium or its shareholders' including 'Affiliated Companies' and 'Contractors.' In the event the corporation believes that its rights are adversely affected, it may resort to arbitration to request compensation.

Most obviously, these provisions appear to restrict the state from applying new economic regulation to the corporation. But they go much further. As the report documents, a country like Chad has a long history of repression that extends to the local communities where the oil pipeline is located. The government has an obligation under the agreement to protect the pipeline. Consider, for example, the possibility that a reforming Chad determined to protect the rights of communities to organize and exercise freedom of speech and assembly. Costs of security and community relations might increase for the corporation. Who would bear them? Under the strict terms of the contract, it would fall to the state.

Exxon representatives might dismiss this as unlikely for public relations reasons alone, not to mention commitments they have made in other venues. But the same legal staff that pursued inclusion of this provision might think otherwise, and that shouldn't matter. Respect for rights shouldn't rely on the discretion of the company to forgo contractual advantages that they have gained.
More powerful still, the stability clause is itself a potent disincentive. In the case of Chad, where the struggle for rights occurs outside of international scrutiny -- and where oil remains the only significant source of foreign investment and earnings -- the disincentive may be enough to crush any initiative for protecting human rights.

How far is the shadow cast? Certainly as far as laws intended to achieve the progressive realization of economic and social rights of the population. Under the strict terms of the State-Investor Agreements "new regulations entailing costs for the consortium on the dumping of waste, usage of water or other industry practices that have implications for human rights," could all be subject to the corporation's 'right of refusal' pushing the state to arbitration if it sought to object.

It is all the more cynical to impose such an agreement on a country that had little in place to begin with. In 1988, when the first exploration and exploitation agreement was made with Chad, it was obvious to all that Chad was not in a position to regulate foreign investment. The country was in nearly permanent civil war, ruled by a fickle dictator who was responsible for the deaths of thousands, including some who he personally detained in a former swimming pool in the capital. More than a decade ago, despite a modicum of stability, the government's capacity to negotiate with international corporations had not developed substantially. This is the situation that is frozen in time by the State-Investor Agreements with ExxonMobil and the oil Consortium. In the meantime, the country has ratified major human rights treaties creating new obligations under international law, none of which is taken into account.

The effect of freezing government policies is exacerbated by the requirement that disputes be regulated through international arbitration. Again, this may seem entirely routine to the international lawyers negotiating such agreements. But arbitration raises the costs of any challenge and removes it from the realities of the country. In the specialized realm of commercial arbitration, it is also less likely that issues of human rights, public policy or the possible supremacy of national constitutional law will get a sympathetic hearing.

As a procedural matter, Exxon can refuse the application of a government directive -- on the vague basis that it is 'unreasonable,' inconsistent with the agreement, or 'non-compliant with ... the rules of art of the international petroleum industry.' The last basis suggests the possibility that anything exceeding standard and existing practice -- as opposed to best practice, highest standards or evolving practice' -- could be challenged. With the right of refusal in the hands of the corporation, it merely needs to reject the directive in order to inflict costs on the government, no matter what the eventual outcome.

The secrecy that surrounds these agreements does nothing to bolster the good faith claims of the corporation. Though nominally 'published' after adoption, the two principal agreements between Exxon and the government of Chad have been closely guarded. I have been in several meetings where Exxon claimed they were public but wouldn't release them. They are not included in the massive documentation that Exxon or the World Bank frequently refers to when vaunting transparency. Amnesty International obtained the original Host Government Agreement of 1988 and the 2004 agreement from local NGOs who obtained them, in turn, through personal contacts. In this report, Amnesty International calls on parties to such negotiations in the future, including countries and companies, to make agreements available for public scrutiny before they become effective.

Chad and Cameroon have a duty to respect, protect and fulfill the human rights of their populations in accordance with their international obligations. This requires laws and regulations, including those that address corporations operating within their territory. The message from Amnesty International's report is that countries should not have to agree to conditions that are inconsistent with international human rights law. Investors, lenders, and most of all, lawmakers in the United States who regulate our companies, should ensure that countries don't have to.

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Read Amnesty International's report. »

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