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UK Export Credits Guarantee Department: Minimum Conditions for Reform
A memorandum from concerned non-governmental organisations and parliamentarians

by concerned NGOs

first published 31 July 2000

Summary

In July 1999, the UK Secretary of State for Trade and Industry announced a Review of the mission and status of the UK Export Credits Guarantees Department (ECGD). This Memorandum, signed by 35 UK NGOs and parliamentarians, sets out proposals to reform the ECGD so as to bring it in line with the stated policies of the UK government on sustainable development, human rights, open government and putting ethics “at the centre” of foreign policy.

Contents

Introduction

In July 1999, the Secretary of State for Trade and Industry announced a Review of the mission and status of the UK Export Credits Guarantees Department. The Review is due to be published shortly. Many UK Non-Governmental Organisations (NGOs) submitted policy recommendations early on in this process. This Memorandum, currently signed by 35 UK NGOs and parliamentarians sets out an agreed platform for reform of the ECGD based on the submissions made. The proposals represent the minimum reforms deemed necessary for bringing the ECGD's operations in line with the stated policies of the UK government on sustainable development, human rights, open government and putting ethics "at the centre" of foreign policy.

The Urgent Need for Reform

Reform of the ECGD is long overdue. At present, the Department operates in a secretive and untransparent manner, is unaccountable even to parliamentarians and lacks any environment and development guidelines. As a result its projects and programmes frequently promote ends which are at odds with human rights and sustainable development.

Although the Department has now adopted an environmental questionnaire for screening its projects, the questionnaire is wholly inadequate. Indeed, a recent report by the Select Committee on Trade and Industry described the questionnaire as "possibly the weakest form of environmental assessment that could have been chosen."1 The Committee also criticised the exclusion of defence credits from the screening process.

Other reforms have also proved less substantive than portrayed. For example, the Chancellor's announcement of an end to government export credit support for arms sales and other "unproductive" exports to 63 of the poorest countries, whilst being a welcome step in the right direction, falls short of the call by the International Monetary Fund for an end to all developing country export credits for unproductive expenditure.

Likewise, the announcement that the UK will give 100% debt relief -- including export credit debt -- for Highly Indebted Countries, whilst going some way towards relieving the burden of debt, fails to bring creditors to account for their shared responsibility in the build-up of unsustainable debts.

A Platform for Reform

If the ECGD reform process is to move forward in a manner that brings the Department into line with the requirements of sustainable development, substantive changes will be needed in the ECGD's management practices and operational framework. The following are key to achieving the necessary changes in UK export credit policy and practice:

Coherence across Government

  • We recommend a new Mission Statement for ECGD which makes it clear that the Department will only promote exports which are consistent with the attainment of wider government objectives including those on poverty reduction, sustainable development and the promotion of human rights and climate change mitigation.

Human Rights, Environmental and Development Standards

  • Mandatory human rights, environmental and development standards, drawn up in consultation with project-affected communities and civil society and aimed, inter alia, at ensuring that projects
    • have the minimum impact on the environment;
    • safeguard the lives and livelihoods of those directly affected by ECGD-backed loans;
    • minimise the need for resettlement and ensure that those resettled are better off than prior to the project;
    • assess alternatives to the proposed project, including the option of the project not being implemented;
    • ensure the full and active participation of affected people and interested groups in the decision-making process surrounding the project; and
    • ensure that projects have been rigorously and transparently screened for their full, climate change impacts.
  • These standards should be consistent with, or higher, than those required by the World Bank and recommended by the Development Assistance Committee of the OECD. They should also fulfill the letter and the spirit of the UK's undertakings under those international agreements and conventions which it has ratified.2
  • Internal procedures, including career penalties and rewards, to ensure that inappropriate projects are screened out and that approved projects comply fully with agreed environmental and development standards.

Corporate Standards

  • A requirement on the ECGD to consider the past human rights, environment and development record of companies applying for ECGD credits and investment guarantees;
  • A requirement on UK companies receiving ECA support that they agree to meet the same environmental, labour and development standards in other countries as they would be expected to observe in the UK;
  • A requirement on the ECGD to not extend support for any company which is in breach of any provision of the OECD Guidelines for Multinational Enterprises;
  • The cancellation of all cover - for a period of at least five years - to companies which have been proved to have been involved in bribery or corrupt practices;
  • A requirement on the ECGD to ensure that the contracts which it supports have been awarded through open tendering processes;
  • An end to the practice of underwriting 'commissions' as part of contracts.

Non-Productive Expenditure and Arms

  • The ECGD should be prohibited from financing non-productive investments.
  • We further recommend that the British Government plays a leading role in negotiations to secure a multilateral agreement to abolish the provision of export credit for military purposes.
  • Details on ECGD current cover for arms sales should be included in the next Annual Report on Strategic Exports in the interests of making the Government's reporting more accessible to Parliament and the public.

Transparency

  • Advance notification on pending applications, detailing the type of project, the amount guaranteed, the companies involved, the country involved and likely human rights, environmental and development impacts;
  • A requirement on the ECGD to make public all documents relevant to the project and investment, including those related to the human rights, environmental and development impacts of ECGD-supported projects and to make translations available in the languages of project affected people;
  • A presumption in favour of disclosure, with companies having to demonstrate commercial confidentiality before a document is withheld from public release;
  • A requirement on the ECGD to consult with affected communities and interested public interest groups prior to any decision being taken on approval of a project and to demonstrate how account has been taken of the issues raised.
  • After approval of a project, a mandatory "flagging" period should be instituted, during which time concerned groups or members of the public can raise their concerns. Where the concerns raised are widespread or substantial, projects should be reexamined by an independent review body.
  • ECGD should publish a detailed breakdown of its current and past cover for arms exports. The detail should include, by country of destination, the type of equipment, numbers exported and value of ECGD cover.

Accountability

  • An independent procedure to hear and adjudicate on complaints received by the public over ECGD-backed projects, along the lines of the World Bank's Inspection Panel;
  • Legislation enabling those adversely affected by projects supported by the ECGD to sue in the UK and to have access to legal aid;
  • Measures to broaden the base of the ECGD's Advisory Council, by including those with an expertise in human rights, environment and development issues;
  • A requirement on the ECGD to report annually to the UK Parliament and for the government to hold a debate on the report.

Debt

  • An independent review of the ECGD's debt portfolio with a view to sharing financial responsibility for projects that were poorly conceived.
  • The writing off of debts incurred through the moral hazard attendant on the use of export subsidies made available through the UK ECGD.

Country Screening

  • The ECGD should be required to develop country environmental and social screening policy ratings - which reflect the levels and likely enforcement of relevant standards - to help screen applications.

Project Content

  • The ECGD should be given a remit to further the 'environmental modernisation' of the export sector of British industry through:
    1. A general prohibition on the export of unproductive or domestically banned or obsolete technology.
    2. The phasing out of support for 'sunset' industries with low employment intensity and reliance on subsidies.
    3. The introduction of preferential terms of support for 'sunrise' industries in sustainable technologies (such as environmentally sustainable, renewable energy) in need of support to compete fairly (given the failure of competitors, such as fossil power to internalise environmental costs).

Supporting Organisations

Ann Feltham, Campaign Against Arms Trade
Paul Allen, Centre for Alternative Technology
Michael Bartlet, Quaker Peace and Service
Tony Benn MP - Labour
David Chaytor MP - Labour
Karen Joyner, Christian Aid
Harry Cohen MP - Labour
Nicholas Hildyard, The Corner House
Frances Carr, Down to Earth - The International Campaign for Ecological Justice, UK
Jim Cousins, MP
Saskia Ozinga, FERN
Eleanor Chowns, Globe UK - All Party Parliamentary Group
David Drew MP
Bill Etherington MP - Labour
Margaret Ewing MP- SNP
Marcus Colchester, Forest Peoples' Programme
Duncan McLaren, Friends of the Earth
Yashar Ismailoglu, Halkvi
Hasankeyf Platform
Richard Harkinson, Minewatch
Kate Geary, Ilisu Dam Campaign
Dr. Lynne Jones MP
Nigel Jones MP - Liberal Democrat
Kerim Yildiz, Kurdish Human Rights Project
Dr. Aya Ata, Kurdish Community Centre Haringey
Sevim Taz, Kurdistan Information Centre
Dr. Rebwar Fata, Kurdish Media
Dr. Kamal Mirawdeli, Kurdistan National Congress
Dr. Azad Shekani, Kurdish Cultural Centre
Jean Lambert MEP
Elfyn Llwyd MP
Caroline Lucas MEP
John McAllion -Labour
Robert McCartney MP - UKUP
Alice Mahon MP- Labour
Alan Meale MP - Labour
Bill Michie MP - Labour
Tricia Feeney, Oxfam - UK
Estella Schmid, Peace in Kurdistan Campaign
Geoff Nettleton, Philippine Indigenous Peoples Links
Fiona Darroch, The Protimos Foundation
Tom Kenny, Rights and Accountability in Development (RAID)
Alan Simpson MP
Andrew Stunell MP
Simon Thomas MP
Dara Jamil, United Kurdish Committee
Paul Barber, Tapol - The Indonesia Human Rights Campaign
Mark Thomas
Jenny Tonge - Liberal Democrat
Rudi Vis - Labour
Robert Napier, Worldwide Fund for Nature - UK
Barry Coates, World Development Movement
Maurizio Ferrrari, World Rainforest Movement - UK Office

Notes and References

1 The Committee summarized the questionnaire's weaknesses as follows:

" ... We note that there are a number of other stronger tools that could have been used to assess, to a greater degree, environmental impact... The environmental questionnaire requests information on the nature of the project where cover is requested, with the onus on the applicant to provide any information ... There is no information as to exactly what standards will be used, how the information provided will be followed up during the life of the project, nor what action will be taken if a questionnaire leads ECGD to the belief that more environmental mitigation is necessary.

"The environmental screening process is to be reviewed between 3 and 12 months. We recommend that an analysis of the costs and benefits of the screening process is published and that there be clear, and published, criteria on which decisions will be based. The questionnaire is possibly the weakest form of environmental assessment that could have been chosen. We also recommend that the opportunity is taken to examine other options and we urge the publication of an analysis of all other possible tools of environmental assessment that are available to ECGD and the reasons for having rejected them in favour of a questionnaire." [House of Commons Select Committee on Trade and Industry, 3rd Report, January 2000]

2 Such undertakings include: the UN Covenant on Economic, Social and Cultural Rights; the UN Convention on the Rights of the Child; the UN Convention on the Elimination of Discrimination Against Women; the UN Climate Convention; the Kyoto Protocol; the UN Convention on Biodiversity; the Rio Declaration (on sustainable development); the Basle Agreement (on the transboundary movement of waste); the UNCTAD Rules for the Control of Restrictive Business Practices; and relevant International Labour Organisation (ILO) Conventions, such as those on Labour Conditions and Indigenous and Tribal Peoples.