UK Government rushing through emergency legislation to weaken export credit agency's human rights and environment rules

by Nicholas Hildyard

first published 13 April 2009

The UK Government is using emergency powers to amend the Export and Investment Guarantees Act 1991 governing the Export Credits Guarantee Department (ECGD), so that exporting companies can apply for insurance after they have started constructing their overseas projects (such as oil and gas pipelines, hydroelectric dams and power plants). The amendments would enable companies to circumvent the Department's human rights, environment and sustainable development safeguards.

The Industry and Exports (Financial Support) Bill should be finalised on Tuesday 21 April.

On 13 April 2009, The Times newspaper published the following commentary by Nicholas Hildyard of The Corner House:

"Morals must count to Government, even in the slump
The Government is trying to slip through Parliament the biggest changes in almost a decade to a highly controversial scheme that helps British businesses to operate overseas. The public needs to be aware of the implications.
The Government offers UK companies taxpayer-guaranteed insurance so that they can do business in parts of the world where private insurers are unwilling to take the risk.
Typically, projects such as dams, oil pipelines or gas extraction in some of the farther reaches of the world are deemed uninsurable by major private insurers. But, under current rules, public money will be risked only when the scheme is monitored and found to conform to Britain's environmental and human rights policies.
Though some say these safeguards are not enough, they do give some protection.
Now the Government is trying to amend the rules so that projects can be insured after the UK company has completed work. This is unacceptable.
Ministers will say that they are not watering down the existing social and environmental standards to which all schemes with taxpayer financing must conform.
In practice, if a company has already completed a project, the chance of UK government officials being able to influence their decisions for the social and environmental good are minimal.
World Bank standards, to which Export Credit Guarantee Department (ECGD) projects are supposed to conform, explicitly require assessments to be completed before financing is agreed.
Retrospective financing would therefore place ECGD in breach of its own stated standards and international undertakings.
With the ECGD under pressure to 'get money out of the door' to ease the credit crisis, there is a danger that projects will be rubber-stamped, without difficult questions being asked, if retrospective financing is permitted.
This has come up before.
When ECGD tried to apply procedures retrospectively in 2000 in order to finance the controversial Ilisu Dam in Turkey, Parliament's International Development Committee was scathing: 'There is good reason for the expectation that relevant international criteria should be met before a proposal is agreed and cover sought -- it is a sign of political will, institutional capacity, developmental commitment and good faith.'
This should remain the case."

For other related articles, see:

Mandelson 'weakens ethical exports rule'

CASE STUDY: Turkish dam, British dilemma