Corporate complicity in human rights Essay Example

Dabhol Power project from 1992 to 1998, Enron had significant influence over both central and Maharashtra governments but failed to effectively engage with villagers who had legitimate concerns about support and environmental impact. Villagers' objections were either ignored or dismissed by Enron, leading to their opposition against the project.Despite attempts through legal action and direct dialogue with the company, more questions emerged instead of receiving answers. The lack of transparency in the project, its impact on livelihoods, human consequences, and potential environmental damage led to the formation of local opposition as a last resort for protest.

In 1992, the Indian government allowed foreign investment in the power and electricity sector. Enron officials expressed interest in constructing a power plant in India during meetings with senior government representatives. The Maharashtra State Electricity Board was informed about Enron officials' visit to survey land for the proposed project. Following this delegation trip, Enron and General Electric met with central government officials in New Delhi to discuss further details.

On June 20th, 1992, an MoU (Memorandum of Understanding) was signed between Enron, General Electric,and Bechtel Corporation along with provincial authorities for building the Dabhol Power project. The joint venture would be known as Dabhol Power Corporation (DPC). However,"Enron" or DPC faced public opposition and criticism due to its power pricing and association with dollars. Previously,the exchange rate stood at four rupees per dollar but changed to 32 rupees per dollar at the time of signing the project.The current exchange rate is 38 to 40 rupees per dollar. Enron's pricing has posed challenges for engineering, electrical, and heavy industries in terms of affordability, while benefiting chemical industries at the expense of the

environment. To restrict peaceful expression and assembly in Ratnagiri and nearby areas, the state government has utilized various laws such as the Bombay Police Act, Code of Criminal Procedure, and Indian Penal Code. Unfortunately, these laws have been abused by the police who label group protests against the Dabhol Power project as criminal activities and prevent protest leaders from entering active resistance zones. Individuals leading anti-DPC protests have also faced unjustifiable serious criminal charges under the Indian Penal Code without adequate evidence. Regrettably, law enforcement often resorts to excessive force using lathis, fists, and sticks during these arrests. Protests against the construction of the Dabhol Power project began in 1994 involving local farmers, shopkeepers, fishermen, politicians, and other residents but ended in 1996 when the Shiv Sena-BJP government canceled it. Currently, there are no international regulations that mandate multinational corporations (TNCs) to adhere to human rights standards.The International Labor Organization (ILO) initiated global regulation of corporations in 1977 through its Tripartite Declaration of Principles for Multinationals and Social Policy. This declaration highlighted the responsibility of multinational corporations (TNCs) to comply with international human rights and labor laws. According to a survey conducted by NGOs, over 90 percent of respondents believe that TNCs should be held responsible for ensuring fair working conditions and preventing discrimination.

Human Rights Watch stresses the significance of respecting freedom of association and participating in collective bargaining, while also prohibiting forced and child labor. They also advocate compliance with national laws and discourage illegal activities like corruption. Human Rights Watch holds both the funders of Phase I and U.S. government agencies advocating for the project accountable for their actions.

Considering their heavy involvement in

lobbying for three U.S.-based companies and providing public funds, the U.S. government bears a unique responsibility. Human Rights Watch emphasizes that institutions funding Phase II must also guarantee respect for human rights to avoid being held liable for any violations. These institutions need to demonstrate a clear commitment to upholding human rights by addressing legal restrictions on freedom of expression and assembly, ongoing cases against activists, and failure by supported companies to rectify their practices.Human Rights Watch previously urged both governmental and private financial institutions to tie their funding to compliance with human rights standards during the investigation of the Dabhol Power project. This inquiry examined the involvement of financial institutions in financing Phase I and those responsible for funding Phase II. Despite the World Bank's refusal, Enron sought funds from private foreign investors like Bank of America and ABN Amro. Indian banks, led by Industrial Development Bank of India, also provided financial support for the Dabhol Power project. The US government obtained political risk insurance and loan guarantees from two agencies - the Overseas Private Investment Corporation (OPIC) and Export-Import Bank (Ex-Im Bank). OPIC contributed approximately $100 million in political risk insurance while Ex-Im Bank granted a loan guarantee worth around $290 million in late 1994. In a speech before the Senate Appropriations Committee on June 16, 1998, Madeleine Albright, Secretary of State for the United States government, highlighted key objectives of US foreign policy which included vigilance in safeguarding national interests, fulfilling commitments, advocating for freedom and human rights, promoting open markets, and upholding adherence to the rule of law.When it comes to the Dabhol Power project, the United States government prioritized open

markets over human rights and adherence to the rule of law. Various US government officials and agencies, including the Department of Energy, Department of State, Department of Commerce, and Central Intelligence Agency consistently exerted pressure on behalf of the companies involved. They did so by lobbying extensively with the Indian government. The project received financing from OPIC and Ex-Im Bank, totaling $400 million from these US institutions. In 1995, when the Shiv Sena-BJP government suspended the agreement, the US Department of Energy issued a warning about its negative impact on US-India relations and India's ability to attract foreign investment. The Indian authorities are committed to supporting their first "fast-track" projects in order to establish a strong track record with international investors. However, they recognize that introducing alternative funding packages will take time. Enron's Dabhol Project has achieved financial closure and is currently under construction.The positive message of India's market potential to international investors is reinforced by the involvement of U.S. companies in the project and their consideration of human rights. The funding packages provided by the Overseas Private Investment Corporation (OPIC) and the Export-Import Bank (Ex-Im Bank) encompass labor rights obligations and broader human rights considerations. For Enron's Dabhol Power project, which received $290 to $300 million in U.S. government loan guarantees, a human rights impact assessment was required by the State Department. Ambassador Mr. Wisner, who led the U.S. Embassy in India, conducted an evaluation on human rights conditions in the country. However, despite his previous advocacy for Enron's commercial interests, Ambassador Wisner did not address the associated human rights violations related to the Dabhol Power project when questioned about them in 1997. Instead,

he suggested investigating "protests" and claimed that local villagers were dissatisfied with their compensation from Enron and desired more financial compensation. He admitted lacking knowledge about police records or any other relevant human rights violations and appeared confused as to why he was approached regarding this matter, advising individuals to visit India themselves for gathering information firsthand.Human Rights Watch expresses deep concern over Ambassador Wisner's apparent disregard for human rights violations during his involvement with Enron's project. This incident points to a lack of concern by U.S. authorities for human rights when commercial interests are at stake. In order to obtain information about the human rights review of the Dabhol Power Project, Human Rights Watch submitted a Freedom of Information Act petition. The Ex-Im Bank responded on July 23, 1998, acknowledging receipt and providing an impact assessment and a letter. However, on October 1, 1998, they informed that there were no additional documents related to human rights for the loan guarantee. The State Department's impact assessment had minimal objections based on political factors or human rights concerns. While a previous human rights impact assessment from 1994-1995 could not have predicted violations in 1996-1998, there were already demonstrations and reprisals in 1993-1994. The lack of interest from high-ranking State Department official Mr. Wisner, the limited knowledge of the general counsel's office at the Ex-Im Bank, and the insufficient information provided by the Ex-Im Bank's impact assessment all indicate that human rights were not considered by the U.S governmentDespite the lack of interest, Phase II of the project still requires funding with an estimated cost of $1.5 billion and a capacity of 1,440 megawatts. Initially, the plan

was for the U.S government's Export-Import Bank and OPIC to finance Phase II alongside private investors. However, Enron's support for the project was suspended in May 1998 due to atomic tests conducted by India and Pakistan. Despite this setback, Enron believed that the sanctions would be lifted by the end of 1998. Although Phase II planning faced challenges due to insufficient funding from organizations like OPIC and Ex-Im Bank, Enron assured investors that construction would not be affected. Nevertheless, support from OPIC and Ex-Im Bank was halted because of the atomic tests. As a response, on September 1, 1998, Enron announced securing $1 billion in funding from international commercial banks. This funding package included a $200 million loan guarantee from Belgium's Export-Import Bank and $50 million from J-Exim (the Export-Import Bank of Japan). Additionally, Indian banks led by the Industrial Development Bank of India agreed to provide $300 million for Phase II. The State Bank of India also agreed to lend $150 million while on November 9th, 1998; the Industrial Finance Corporation of India provided an $83 million loan for Phase II. Furthermore, both State Bank of India and state-owned Industrial Development Finance Corporation expressed their intention to lend an additional $100 million for Phase II purposes.
The Indian government did not provide any counter guarantee. After obtaining funding, Enron announced that Phase II construction would begin in the fourth quarter (October to December) of 2001. It should be noted that not all institutions funding Phase II have policies governing their transactions like OPIC and Ex-Im, which include conditions related to human rights. However, according to Human Rights Watch, any financial institution supporting Phase II without

implementing measures to protect human rights cannot escape responsibility for violations. Currently, it is uncertain whether the company will seek support from the U.S. government, as sanctions against India were eased in 1998, allowing OPIC and Ex-Im Bank support for projects there. The Dabhol Power project is situated in a stable region without a controlling governmental entity. India is recognized as the world's largest democracy with a robust civil society that advocates for human rights and has legal protections through an active judiciary system, along with principles of freedom of expression and peaceful assembly.The violations resulting from the Dabhol Power project, which are connected to both DPC and the government's actions in Ratnagiri district, pose a challenge to the assumption that increased investment leads to improved human rights and adherence to the rule of law. The resistance shown by villagers who have experienced land seizures and water pollution caused by DPC stems from their opposition to the demands of this project. The mistreatment endured by dissenting villagers can be attributed to Enron, the parent company of DPC known as a beneficial investor. Governments and companies engaged in business and investments should take heed of this lesson provided by the encounter with the Dabhol Power project – that without a distinct commitment to human rights, there will be no advancement or safeguarding of these rights. It serves as a reminder that even in countries considered democratic and open, these rights may worsen instead of improving.