Arms and oil bosses refuse to attend corporate responsibility inquiry

Firms including BAE Systems, which have benefited from UK's export credit agency, fail to attend to inquiry into its work

guardian.co.uk, Rupert Neate, Sunday 17 June 2012

Among the loans underwritten by the Export Credits Guarantee Department
 was one for £35m to Robert Mugabe's Zimbabwe for the purchase of five
of BAE Systems' Hawk fighter jets. Photograph: PA

The bosses of some of Britain's biggest arms and oil companies have refused to attend a parliamentary inquiry into the use of hundreds of millions of pounds of taxpayers' money to help dictators build arsenals and facilitate environmental and human rights abuses.

The businessmen, including Ian King, chief executive of BAE Systems, had been invited to an all-party investigation into the Export Credits Guarantee Department (ECGD)'s underwriting of loans, including £35m to Robert Mugabe's Zimbabwe to buy five Hawk fighter jets.

The all-party parliamentary group on international corporate responsibility is examining more than 40 years of ECGD operations overseas which have led to it being dubbed the "department for dodgy deals" by the Jubilee Debt Campaign.

Arms and oil companies are the biggest users of ECGD underwriting because traditional lenders are often reluctant to support projects that have the potential to lead to environmental or human rights abuses.

The companies were asked to attend the hearing to offer their views on how best to reform the role of the ECGD, which is part of the Department for Business, Innovation and Skills and has changed its operating name to UK Export Finance (UKEF).

Other companies that decided not to send representatives include Thales, a French-owned arms group, and Carillion, a FTSE 250 construction company and the largest provider of outsourced management of defence facilities. Graham Farley, Carillion's director of export finance, pulled out the night before he was due to give evidence, according to Lisa Nandy, the Labour MP for Wigan and chair of the inquiry.

At the time of publication, Carillion had has not responded to Guardian inquiries as to the reason for Farley's withdrawal. Thales said in statement it did not believe "there was any specific aspect that was particularly pertinent" to the company and so declined to participate.

BAE Systems, the ECGD's biggest customer, said last week that it would not send King or any other representative to the inquiry. In a one-page letter to Nandy, the company said: "As you will know, there are already strict controls on defence exports in place, with which BAE Systems fully complies. Any item exported from the UK, which is subject to export control, needs a licence. The Export Control Organisation hold this responsibility and BAE Systems works closely with them to ensure compliance.

"We await the results of your inquiry with interest. However, BAE Systems does not intend to contribute further written or oral evidence."

BAE used ECGD funding to support the notorious al-Yamamah "oil for arms" deal with Saudi Arabia, involving Tornado and Eurofighter Typhoon aircraft. BAE was investigated by the Serious Fraud Office amid allegations of bribery and corruption. The inquiry was dropped following the intervention of the then prime minister, Tony Blair.

The ECGD also loaned £35m to Zimbabwe to buy five Hawk fighter jets from BAE between 1989 and 1992. Zimbabwe, which was already heavily indebted at the time of the loans, spent £49m repaying the cost of the Hawks, according to a response to a freedom of information request from the Jubilee Debt Campaign. Mugabe's government deployed the jets in the 1998-2002 war in the Democratic Republic of Congo, Africa's most deadly conflict in modern history, which led to 5.4m deaths.

BP has used ECGD support for a 1,760km joint venture oil pipeline through the Caucasus, the construction which has allegedly led to a catalogue of human rights abuses, but it also declined to send a representative to the inquiry. The company said it has submitted written evidence, but Nandy said she was disappointed that recipients of funding had declined to send representatives.

"This is the first of its kind, looking not just through the lens of economic growth or sustainability, but how the two can be successfully combined. In the wake of the financial crisis there is a widely recognised responsibility on business to help develop sustainable growth and uphold high ethical standards. This inquiry is an opportunity to do so," she said.

It was revealed at the inquiry that the ECGD's independent advisory body, the Export Guarantees Advisory Council, has never advised the business secretary Vince Cable, who is ultimately responsible for the loans, to withdraw support from a project. The chair of the EGAC, Andrew Wiseman, a partner at the law firm Stephenson Harwood, also disclosed that the oversight body meets Cable only once a year.

Nick Dearden, the director of Jubilee Debt Campaign, said: "There's a huge amount of evidence which shows that neither UKEF nor its advisory council are able to hold the companies they support to human rights or environmental obligations.

"What standards do exist are applied to less than half of UKEF's current portfolio, are discretionary in any case and give no formal mechanism for complaint or evaluation. Most worrying of all, those affected by UKEF-supported projects have no right to redress.

"In recent years companies with allegations of corruption against them have been given support, while campaigners have had to use separate channels to hold companies to account for failing their human rights obligations. The case for binding, mandatory rules has clearly been made. Parliament needs to act."