INTRODUCTION
This article focuses on the extant self-regulatory models or initiatives involving multinational corporations (MNCs) in Nigeria's oil and gas sector. The first part focuses on international mechanisms regulating the activities of oil MNCs. The second dwells on the extant self-regulatory framework in the oil and gas industry in Nigeria. It examines the various self-regulatory models, including industry and multi stakeholder codes, as espoused by the various oil MNCs operating in Nigeria. Many MNCs from different countries operate in the oil and gas industry in Nigeria and, in analysing the various self-regulatory codes, this article distinguishes between western and Chinese (and other non-western) oil MNCs. The question at this juncture is whether the self-regulatory models operational in Nigeria are universal to the major oil MNCs or whether the ideological or economic back ground(s) of an MNC's home state have negative (or positive) impacts on its connotation or interpretation of self-regulation. The third part of the article analyses the various self-regulatory models enunciated or localized by oil MNCs in Nigeria. The article then advocates recommendations, before drawing a conclusion. The article contends that self-regulation (in its present form) in Nigeria's oil and gas industry is bedevilled by many ills. One way of redressing the inherent ills would be to localize the views and aspirations of oil producing communities in the self-regulatory framework.
MECHANISMS AIMED AT EFFECTIVE INTERNATIONAL REGULATION OF MNCs
Generally, there is a consensus among scholars that MNCs can be regulated by the host country, home country or international law.Footnote 1
There is no binding treaty or framework regulating the activities of MNCs in international law. Thus, MNCs “do not have legal status in international law”.Footnote 2 However, international instruments that focus on the activities of MNCs can be channelled in two ways: through binding treaties that are directed at states but can also be made applicable to MNCs (such as bilateral agreements and International Labour Organization (ILO) conventions); and measures or soft law focused on the activities of the MNCs.Footnote 3 Furthermore, there is an abundance of literature on private actors in international law.Footnote 4
ILO Declaration
There have been numerous attempts in the international arena to regulate the activities of MNCs. This article focuses first on the ILO's Tripartite Declaration of the Principles Concerning Multinationals and Social Policy (as amended in 2000, the Declaration).Footnote 5 MNCs’ activities in the 1960s and 1970s were the impetus that resulted in efforts to formulate international instruments for the control of MNCs and define their relations to host countries, especially in the developing world,Footnote 6 and the ILO's governing body adopted the Declaration in 1977. The aims of the Declaration are “to encourage the positive contribution which multinational enterprises can make to economic and social progress”Footnote 7 and “to minimize and resolve difficulties to which their various operations may give rise”.Footnote 8 These principles have their origins in major ILO conventions and ILO recommendations which are non-binding in nature.Footnote 9 However, the Declaration's success is tied to the synergy amongst employers, workers’ organizations and MNCs, in tandem with MNCs’ local affiliates or partners.Footnote 10 The Declaration, which is voluntary in nature, is intended as a guide to MNCs, governments and workers’ organizations.Footnote 11
The Declaration has been praised as an instrument that will play an important role in securing the protection of basic labour standards in this era of globalization.Footnote 12 It contains broad sets of rules with which MNCs are expected to comply. The Declaration has inherent strengths, which include the creation of good social policy advantage. Paragraph 12 provides that home nation governments should promote good social practice in respect of the Declaration, having regard to social and labour laws, regulations and practices in host countries, as well as relevant international standards, and that it is intended for the benefit of developing countries. In respect of grievances, paragraph 8 posits that MNCs and national enterprises should respect the right of workers to have their grievances addressed. Also, paragraph 59 states that MNCs and national enterprises working in conjunction with workers’ representatives should seek to establish voluntary conciliation machinery to settle industrial disputes.
Nevertheless, the Declaration has many weaknesses, one being its reliance in paragraph 8 on “sovereign rights of states”. It has been contended that reference to the primacy of national law weakens the Declaration.Footnote 13 For example, some states have ineffectual legal systems and thus are unable to impose effective labour standards or law. It might also lead to MNCs not striving to improve labour standards beyond the prevailing standards in countries. Such reliance on state sovereignty permits some degree of regulatory competition in the area of labour rights and standards; this might be beneficial to certain countries. However, it might induce some states to dilute labour standards in order to remain competitive. Also, the Declaration's “good social policy” does not “envisage the extraterritoriality application of superior home country standards to employees in host states”.Footnote 14
The Declaration is said to be exhortatory,Footnote 15 non-binding and a set of voluntary rules agreed upon by governments, employers and workers’ organizations. MNCs can refuse to abide by it because sanctions are not imposed on them. Thus, the dispute procedure is “not judicial in nature”.Footnote 16 The dispute procedure has no teeth for compliance and is rarely invoked.Footnote 17 The dispute procedure is also handicapped by the annex to the Declaration; paragraph 2 of the annex provides that the procedure should not in any way conflict with existing national or ILO procedures. Notwithstanding the apparent weaknesses of the Declaration, it “still represents the minimum international labour standards that states have agreed should apply to the operations of MNEs”.Footnote 18
OECD Guidelines
The second mechanism in focus on the international regulation of MNCs is the Organization for Economic Co-operation and Development (OECD) Guidelines on Multinational Enterprises (the Guidelines).Footnote 19 The Guidelines were adopted in 1976 and revised in 2000. They are recommendations on responsible business conduct to MNCs operating in or from the adhering countries.Footnote 20 They are voluntary and non-binding, and paragraph 7 of their General Principles encourages self-regulation by MNCs. The Guidelines are very detailed and intended to be localized into national laws or corporate governance by OECD members. Part IV of the Guidelines covers “employment and industrial relations”. Paragraph 10 of the General Principles makes the Guidelines applicable to firms and subcontractors.
The enforcement process in the Guidelines is a major strength. This includes national contact points (NCP), set up by states to “promote the guidelines, collect information, handle enquires and assist in solving problems which may arise between business and labour in matters covered by the Guidelines”.Footnote 21 However, the Guidelines are beset by a plethora of weaknesses. For example, they are weak in enforcement because the NCP are virtually non-existent in many countries.Footnote 22 The issues covered in the Guidelines are also relatively minimal. The OECD is an exclusive club populated by wealthy nations, and thus excludes the majority of nations, especially developing countries. However, notwithstanding their inherent deficiencies, the Guidelines are a “timely addition to the range of transnational regulatory instruments”.Footnote 23 In 2007, the OECD, the European Commission, the European Parliament, non-governmental organizations (NGOs) and trade unions, among others, met and adopted model NCP.Footnote 24 The aims of the model NCP include “making every effort to resolve questions of fact, equal treatment of all parties and the development of clear-cut procedures and timelines. Model NCPs expectedly will not assume that parallel legal proceedings take precedence and will not apply the lack of investment nexus as a pretext to exclude a specific instance.”Footnote 25
The Guidelines were modified in 2011 (this was their fifth revision) and contain extensive recommendations for responsible business conduct to which states should encourage their companies or enterprises to adhere.Footnote 26 At the time of writing, countries adhering to the Guidelines included the 34 OECD states, as well as eight non-OECD states (Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania);Footnote 27 the European Community has also been enjoined to adhere to that part of the Guidelines (regarding national treatment) falling within its purview. The 2011 version of the Guidelines contains voluntary principles and standards for business conduct compatible with the extant laws and international measures. Furthermore, the core of the Guidelines can be extrapolated from the following provision: “countries adhering to the Guidelines make a binding commitment to implement them in accordance with the Decision of the OECD Council on the OECD Guidelines for Multinational Enterprises. Furthermore, matters covered by the Guidelines may also be subject of national law and international commitments.”Footnote 28
A major innovation in the revised Guidelines is the addition of a new human rights chapter, localized in chapter IV. Furthermore, chapter IV is said to elucidate the human rights responsibilities or obligations of MNCs.Footnote 29 The human rights obligations of MNCs embedded in the Guidelines include the requirement that they should respect human rights during their activities, endeavour not to cause or exacerbate human rights impacts, seek ways to reduce or prevent human rights impacts directly attributed to their business, have a policy commitment to respect or promote human rights, carry out due human rights diligence as appropriate, and co-operate in the remediation of adverse human rights impacts to which they have contributed. Thus, the 2011 edition of the Guidelines accords greater recognition to the importance of human rights discourse in the international and national spheres.Footnote 30 However, they remain beset by the same afflictions of the previous manifestations of the Guidelines, including the fact that they represent soft law and are voluntary, and therefore not enforceable. However, some commentators aver that the Guidelines’ non-binding nature is not a disincentive. For example, they are used to promote corporate social responsibility (CSR) activities in different countriesFootnote 31 and “represent a consensus on what constitutes good corporate behaviour in an increasing global economy”.Footnote 32 Furthermore, the Guidelines could develop into hard and binding international law if states adhere and continually apply them in their business relationships with MNCs.Footnote 33
UN Commission draft Code of Conduct
Other attempts at the international regulation of MNCs include the draft Code of Conduct on Multinational Corporations by the UN Commission on Transnational Corporations, which was hitherto projected as a set of binding legal rules intended to regulate the conduct of MNCs in the international domain. The code was expected to be adopted by all countries but was tailored towards MNCs.Footnote 34 Countries were expected to implement or enforce the code. It has been contended that the draft code was comprehensive and intended to be binding on countries.Footnote 35 However, notwithstanding the multiplicity of talks and conferences on it, the code was never formally adopted.Footnote 36 Pursuant to this, the commission was dismantled on the eve of the Rio Earth Summit and its activities taken over by the UN Commission on Trade and Development,Footnote 37 which has promoted voluntary initiatives developed by the MNCs instead of developing a binding regulatory regime.Footnote 38
UN Norms
The UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights for Business (the Norms)Footnote 39 represent another attempt at regulating MNCs in the international domain. The Norms are said to enjoy a higher status in international law in comparison with voluntary codes because they “embody moral and political commitments of governments and corporations and represent standards of law in development (or soft law)”.Footnote 40 Also, the Norms set out a positive list of human rights obligations expected of companies, as well as several ways of monitoring and enforcement.Footnote 41 Also, the Norms are useful yardsticks for determining if states are meeting up to the agreed regulatory standards and, thus, are an important reference and advocacy tool for NGOs.Footnote 42 The Norms are more authoritative than codes of conduct. However, due to their non-binding nature, MNCs have to be attuned to them. Also, NGOs and states must monitor and implement standards under national laws. From this analysis, it is obvious that the extant international regulation of MNCs is skewed to the advantage of the companies.
Global Compact
Another attempt at regulating the activities of MNCs in the international sphere is through the lens of the UN Global Compact. UN Secretary-General Ban Ki-moon defined the Global Compact when he said: “[t]he Global Compact asks companies to embrace universal principles and to partner with the United Nations. It has grown to become a critical platform for the UN to engage effectively with enlightened global business.”Footnote 43
The Global Compact is a collaborative framework for businesses that are willing to commit their operations to align with ten principles, especially in the areas of labour, the environment, human rights and anti-corruption.Footnote 44 It enjoins companies to observe and support a gamut of core values. Presently, the Global Compact has more than 10,000 participating companies from more than 130 countries and is the largest corporate responsibility initiative in the world.Footnote 45 Some scholars contend that, notwithstanding the large number of corporate participants in the Global Compact initiative, many companies remain aloof to it.Footnote 46
Additional mechanisms
Various strategies have been suggested to redress the anomalies in the international regulation of MNCs. These include the use of CSR principles, self-regulation by MNCs and civil regulation. Amao posits that, while CSR practices by MNCs are becoming well entrenched, this development cannot replace the need for effective host state regulation.Footnote 47 Bradford argued on the futility of self-regulation in MNCs and advocated for “the exploitation of legislative opportunities, domestic as well as international, to crystallize soft law into hard law and create binding legal obligations that compel corporate legislative targets”.Footnote 48 He gave examples of three US states, Minnesota, Maine and California, that are in the process of enacting a Model Uniform Code for Corporate Responsibility. A major flaw of a “soft law” approach is the apparent lack of diffusion, especially in codes of conduct; this theme is explored below.
There are large numbers of voluntary codes or initiatives enunciated by MNCs in the sphere of CSR. An example of a widely spread or diffused CSR initiative is the Equator Principles, which are “a global standard in international project finance to base investment decisions for large infrastructure projects (eg, a river dam) on social and environmental criteria”.Footnote 49 Presently, 80 financial organizations have adopted the Equator Principles,Footnote 50 although only two Nigerian based financial institutions (Access Bank PLC and Fidelity Bank PLC) have signed up to them.Footnote 51
In June 2011, the UN Human Rights Council adopted Professor Ruggie's Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework.Footnote 52 This was the culmination of a process that started in 2005 due to the rejection of the draft Norms by businesses and other corporate stakeholders.Footnote 53 The Norms were written in treaty-like language, imposed duties on businesses in respect of human rights and provided for adequate remedies.Footnote 54 Due to the “hard law” nature of the Norms, they were rejected by MNCs and businesses. Also, as a consequence of the sustained resistance and rejection by corporate interests, the UN Human Rights Commission declined to adopt the Norms and instead appointed Professor Ruggie to study and further extrapolate on the key principles of the Norms and suggest recommendations for perusal by the UN Human Rights Commission.Footnote 55
The core of Professor Ruggie's Guiding Principles (Ruggie's Report) can be extrapolated from principle 25. Principle 25 of Ruggie's Report states: “[a]s part of their duty to protect against business-related human rights abuse, States must take appropriate steps to ensure, through judicial, administrative, legislative or other appropriate means, that when such abuses occur within their territory and / or jurisdiction those affected have access to effective remedy.”
The framework of Ruggie's Report rests on three pillars.Footnote 56 These include that a state has the duty to promote human rights and prevent human rights abuses by other stakeholders, such as companies, through adequate rules, regulation and adjudication, acting with due diligence and avoiding infracting on the rights of others or victims’ access to effective remedies.Footnote 57 Ruggie's Report has been widely accepted. For example, it has been localized by US companies doing business in Burma (Myanmar) after some of the sanctions on the country were relaxed.Footnote 58 To further promote Ruggie's Report, the UN Human Rights Council established the Working Group on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises to suggest ways of improving access to justice or effective remedies under national, regional and international planes for those affected by business activities.Footnote 59 A conundrum inherent in Ruggie's Report is that it is very general. Thus, how do we define human rights and does Ruggie's Report cure the inherent deficiencies in the soft law mechanisms on MNCs? Having a generally accepted definition of “human rights” will be very difficult to accomplish. The conceptualization of human rights in the eyes of a citizen of a developed country will be different from that of a member of a community that has been ravaged by environmental pollution in the Niger Delta. Thus, an African's conceptualization of human rights is defined by his political environment, ethnicity, culture and colonialism, among other issues.Footnote 60 This article will align with the views expressed by Professor Ake, who posited:
“For reasons which need not detain us here, some of the rights important in the West are of no interest and no value to most Africans. For instance, freedom of speech and freedom of the press do not mean much for a largely illiterate rural community completely absorbed in the daily rigors of the struggle for survival … if a Bill of Rights is to make sense, it must include, among others, a right to work and to a living wage, a right to shelter, to health, to education. That is the least we can strive for if we are ever going to have a society which realizes basic human rights … in Africa, if liberal rights are to be meaningful in the context of a people struggling to stay afloat under very adverse economic and political conditions, they have to be concrete. Concrete in the sense that their practical import is visible and relevant to the conditions of existence of the people to whom they apply. And most importantly, concrete in the sense that they can be realized by their beneficiaries.”Footnote 61
Thus, any definition of human rights in the international sphere should also reflect the African experience.
Ruggie's Report is soft law, which is a major disincentive in any framework or model purporting to control the activities of multinational corporations. There is the danger that excessive reliance on voluntary mechanisms creates loopholes for MNCs in avoiding responsibility for their actions.Footnote 62 Similar to other soft law mechanisms analysed earlier in this article, Ruggie's Report also suffers from the disadvantages inherent in soft law mechanisms.
Voluntary Principles on Security and Human Rights
Another international soft law mechanism that is said to “regulate” MNCs in the international sphere is the Voluntary Principles on Security and Human Rights (VPSHR). The VPSHR are a US / UK led initiative for business and civil society organizations.Footnote 63 They were established in 2000 to assist companies in localizing human rights protection in the course of maintaining the security and safety of their operations or activities.Footnote 64 The VPSHR encompass three core planks: “risk assessment, interactions between companies and public security, interactions between companies and private security”.Footnote 65 For example, under the VPSHR, MNCs are expected to assess the impact or risk when transferring equipment (including dangerous equipment) to private and public security firms in order to mitigate or reduce any unintended consequences, including human rights abuses.Footnote 66 At the time of writing, nine countries, 27 companies and ten NGOs participated in the VPSHR mechanism.Footnote 67 A major strength of the VPSHR is that they are a “tripartite multi-stakeholder initiative”.Footnote 68 Oshionebo avers that consistent application of the VPSHR in the extractive industries might lead to an improvement in security operations and that best security practices could emerge as a consequence.Footnote 69 However, an inherent flaw of the VPSHR is that they are voluntary and non-binding on MNCs. Thus, MNCs might decide not to enforce or implement the VPSHR. There are no sanctions attached to a refusal by MNCs to localize the VPSHR in their operations.
Extractive Industry Transparency Initiative
The Extractive Industry Transparency Initiative (EITI) is another relevant mechanism. EITI is a voluntary initiative encompassing stakeholders such as governments, NGOs, MNCs, international organizations and businesses.Footnote 70 One of EITI's major objectives is to ensure that the revenue realised from receipts from a country's natural endowments contributes to poverty alleviation and sustainable development, thereby acting as a buffer to the misuse of such revenues that can be a contributory factor in corruption, poverty and conflict in the extractive industries.Footnote 71 EITI sets a global standard for transparency in oil, gas and mining.Footnote 72 It aims to promote transparency and accountability in payments made by extractive corporations to government and government agents.Footnote 73 Nigeria is an active participant in EITI. There are currently 48 implementing countries, 31 compliant countries and 39 countries (including Nigeria) that have produced EITI reports.Footnote 74 In Nigeria, the initiative is designated as the Nigerian Extractive Industries Transparency Initiative (NEITI). A number of oil MNCs have signed up to it, including Chevron Group, BG Group, Shell, Statoil, Total, CNOOC (China) and ONGC (India).Footnote 75
Other international mechanisms “regulating” MNCs but not directly relevant in the oil and gas sector in Nigeria include the Kimberly ProcessFootnote 76 and the International Organization for Standardization (ISO) 2600 Guidance Standard on Social Responsibility.Footnote 77
Academics have heavily criticized the voluntary nature of the international regime for the regulation of MNCs.Footnote 78 In analysing codes of conduct, Dieux and VinckeFootnote 79 contended that CSR is a mere public relations tool and should be replaced with binding laws. They further advocated that NGOs’ pressure on MNCs can be used to keep MNCs in check. On the other hand Professor Picciotto, in a discourse on voluntary codes, postulated that codes are as effective as laws: “codes entail a degree of formalization of normative expectations and practices and, even if they do not directly take the form of law, they may have indirect legal effects”.Footnote 80 He further stated that voluntary codes can be enforced in various ways such as through private law (contractual agreements) and via enforcement by private parties based on a state regulatory law, and that under international law codes can be of a legal and binding nature (for example, World Trade Organization agreements on technical barriers to trade).
SELF-REGULATORY MODELS IN NIGERIA'S OIL AND GAS SECTOR
Generally, self-regulatory models or initiatives are prevalent in many industries in the world. Codes “have become the rule rather than the exception in global business”.Footnote 81 Since the early part of the 20th century when JC Penney introduced the Penney Idea in 1913,Footnote 82 there have been codes of conduct at (individual) corporate and industry levels.Footnote 83 For example, codes of conduct were developed in the textile industry in response to allegations of the terrible working conditions for workers in factories located in developing countries.Footnote 84 Thus, Levi Straus became one of the first MNCs to adopt a corporate code in the textile industry.Footnote 85 Governments also promote the use of self-regulatory initiatives in their own activities. A recent example of a code of conduct in the UK public sector is the Ministerial Code of Conduct.Footnote 86 This code is managed or administered by the Propriety and Ethics team within the Cabinet Office. This team “advises the Cabinet Secretary, ministers and departments on issues under the Ministerial Code, the prime minister's code of conduct and guidance on procedures for ministers”.Footnote 87 Also, in the sphere of human resource management in the UK, civil society organizations influence the practices and policies of companies.Footnote 88
Civil regulatory initiatives include self-regulatory models encompassing various codes of conductFootnote 89 such as corporate codes of conduct, industry or association codes,Footnote 90 codes of conduct drafted or inspired by NGOs,Footnote 91 and statutory regulation. There are a plethora of self-regulatory models in operation in the oil and gas industry in Nigeria. Thus, codes of conduct are a sub-set of self-regulatory models.Footnote 92
LOCALIZATION OF SELF-REGULATORY MODELS IN THE OIL AND GAS INDUSTRY IN NIGERIA
This section focuses on internal codes and multi-stakeholder codes in the oil and gas sector. There are different classifications or typology of the localization of international soft law mechanisms in the different sectors in different countries. Alex Wawryk's classification of corporate codes of conduct as a means of regulating oil MNCs include public international codes of conduct, private internal corporate codes of conduct, industry association codes of conduct and NGO codes of conduct.Footnote 93 On the other hand, Oshionebo classified codes of conduct into internal codes, multi-stakeholder codes and industry codes.Footnote 94 Edwin Mujih subsumed the international soft measures regulating MNCs under regulation by the United Nations and direct regulation.Footnote 95 The classification adopted by this article includes private internal and multi-stakeholder codes. This classification is adopted because it exemplifies the extant self-regulatory paradigm in the oil and gas sector adopted by oil MNCs in Nigeria.
Private internal codes
These strands of codes are fairly prevalent in Nigeria's oil and gas sector. They are mainly employed or adopted by western MNCs as part of their CSR policiesFootnote 96 or as part of their self-regulatory regimes.Footnote 97 However, in its code of ethics in promoting corporate governance, Petrobras (a non-western MNC) commits to producing a social and environmental statement following extensive internal consultation, in which it explains the impact of its activities on the environment and society among others.Footnote 98 Petrobras also seeks to promote a safe work environment and abhors discriminatory practices in its work force.Footnote 99
In Total's Society and Environment Report 2011, the company seeks to promote equal pay between the sexes, claims to be a responsible corporate citizen and states that, in 2011, it trained more than 35,000 employees in its anti-corruption e-learning programme.Footnote 100 In its code of conduct, Total seeks to localize the core of the Universal Declaration of Human Rights, ILO conventions, the OECD Guidelines and the principles of the Global Compact in its operations.Footnote 101 One of Total's General Principles is to “continuously uphold respect for human rights standards within its sphere of activity”.Footnote 102
Addax Petroleum, now a Chinese MNC, is an emerging player in Nigeria's oil and gas industry. In its code of conduct, Addax posits that it has commitments to the following stakeholders: contractors, regulators, joint venture partners, clients, colleagues, suppliers and shareholders.Footnote 103 Also, Addax Petroleum seeks to be a good corporate citizen and its CSR principles were developed in line with international instruments such as the Global Compact, Universal Declaration of Human Rights and ILO conventions.Footnote 104 Addax's long term vision can be extrapolated in seven core areas: corporate governance, ethical business conduct, fair employment practices, health and safety in the work place, environmental protection, corporate philanthropy and socio-economic development.Footnote 105
Shell has localized many of the international soft measures on MNCs into its business model in Nigeria. It has been contended that Shell re-invented itself as one of the main exponents of CSR in the corporate world.Footnote 106 In its General Business Principles, Shell establishes its commitment to the following stakeholders: shareholders, customers, employees, those with whom Shell does business and society.Footnote 107 In its commitment to its employees, Shell pledges to respect the human rights of its employees and to provide them with a safe working environment.Footnote 108 In respect of society, Shell posits that it will “conduct business as responsible corporate members of society, to comply with applicable laws and regulations, to support fundamental human rights in line with the legitimate role of business, and to give proper regard to health, safety, security and the environment”.Footnote 109 Furthermore, Shell avers in its code of conduct to respect human rights as localized in the Universal Declaration of Human Rights and ILO conventions.Footnote 110
The opposition of the Ogoni people to Shell's activities has had positive effects. The Movement for the Survival of the Ogoni People (in coalition with both local and international NGOs) brought the human rights violations and environmental degradation in that part of Nigeria to the attention of the world. Action by the movement also had a major impact on Shell's operations in Ogoniland. Shell revised its code of conduct to include human rights, and Shell (and other MNCs) now regularly organize training and consultation with stakeholders in Nigeria's oil and gas sector.Footnote 111 Thus, it has been contended that Shell is a “different” company today by embedding the virtues of CSR due to the impact of the Ogoni crisis, although Shell's compliance with the norms in the Niger Delta is highly debatable.Footnote 112 Furthermore, notwithstanding Shell's averments in its codes and its much vaunted co-operation with NGOs in different countries, it can be argued that Shell pays lip service to its codes rather than engaging in well-defined self-regulatory measures. For example, in Peru in the late 1990s, due to international condemnation of Shell's activities in Nigeria, Shell signed an agreement with an NGO network (Red Ambiental Peruana) to monitor the environmental impacts of its proposed project in Peru.Footnote 113 However, Shell abandoned the gas project after spending more than $250 million in exploration expenses. The reason adduced by Shell's withdrawal was that the Peruvian government had rejected Shell's plans for a distribution monopoly and the exclusive rights to determine prices.Footnote 114 Thus, in this case, Shell's economic interests undermined its involvement in any self-regulatory initiatives or partnership with NGOs in Peru.
Analysis of codes of conduct in Nigeria's oil and gas industry
One of the major weaknesses in the codes of conduct in Nigeria's oil and gas sector is that many of the codes are worded in vague terms.Footnote 115 Oshionebo gives the examples of Exxon Mobil and Shell as MNCs with vague terms in their codes of conduct.Footnote 116 Exxon Mobil's Standards of Business Conduct state that “it is dedicated to running safe and environmentally responsible operations”.Footnote 117 However, in the Exxon Mobil code, there is no definition of the term “safe and responsible operations”.Footnote 118 The clause could therefore be subjected to a barrage of meanings or interpretations by diverse stakeholders. Shell also has a similar wording and states that it shall “support fundamental human rights”.Footnote 119 Oshionebo contends that Shell is in the wrong for using such vague expressions and the appropriate terminology should be to “respect or observe human rights”.Footnote 120 The author's contention is that, by specifically stating that it “support[s] fundamental human rights”, Shell is by necessary implication excluding other species of human rights such as socio-economic rights from the contemplation of its codes of conduct. This is very apt in the Nigerian constitutional framework in which fundamental human rights are akin to civil and political rights, which are justiciable and enforceable in Nigerian courts. However, socio-economic rights are neither justiciable nor enforceable in Nigeria.Footnote 121 The gamut of socio-economic rightsFootnote 122 are provided for in chapter II of the Nigerian Constitution, which deals with fundamental objectives, and directive principles of state policy are not enforceable against the state by Nigerian citizens by virtue of section 6(6)(c) of the constitution. This undermines section 13 of the constitution which states that it shall be the duty of the state and its organs to observe and apply the provisions of chapter II. On the other hand, civil and political rights are enforceable against the state and citizens under the Nigerian Constitution and these are contained in chapter IV. Civil and political rights in the constitution include the right to privacy, the right to a fair hearing and the right to dignity. However, socio-economic rights such as the right to a clean environment are not enforceable under Nigerian law. Thus, MNCs should emphasize socio-economic rights in their various codes of conduct because many communities in the Niger Delta suffer from a lack of a “clean and healthy environment”, which is not a justiciable right.
In respect of Addax Petroleum, there appears to be no express mention of human rights protection in its code of conduct. One plausible reason is that many firms are affected by their ideological and cultural background in the construction of the self-regulatory paradigm in Nigeria. This is especially so in respect of non-western MNCs operating in Nigeria. Amaeshi and Amao analysed the impact or influence of the (western) home countries of the oil MNCs in their localization of codes of conduct in Nigeria's oil and gas industry. Their conclusion was that “corporate codes of these MNCs operating in Nigeria, to a large extent reflect the characteristics of their home countries’ model of capitalism, respectively, albeit with [sic] certain degree of modifications”.Footnote 123 Furthermore, in applying Amaeshi and Amao's assertions to the Chinese oil MNCs, this article contends that Addax Petroleum will not seek to promote human rights standards in its operations.Footnote 124 For example, there is consensus in academic literature that Chinese MNCs operating in Africa attach little importance to human and labour rights in their sphere of operations.Footnote 125 Furthermore, the behaviour or actions of Chinese MNCs is affected or accentuated by their cultural, political and regulatory background. For example, “Chinese MNCs’ behaviour in Congo represents an epitome of value and culture inherently originating from China, whose regulatory infrastructure is normally not subject to the degree of criticism as encountered in the west”.Footnote 126 Thus, in the west, MNCs’ activities are constrained by a plethora of factors, such as the activities of NGOs, judicial activism and government regulation. This is not the case in China. Hence, in China it has been argued that many of the state owned or controlled MNCs do not have a tradition of transparency in their business operations.Footnote 127 Chinese MNCs owe their duty of transparency to the government and not to the shareholders or other stakeholders in the company. Furthermore, it has been contended that Chinese MNCs have triggered a race to the bottom by African states. Peter Bosshard posits:
“China is not a member of the OECD, and China Exim Bank has not signed on to the Common Approaches. The Bank adopted an environmental policy in November 2004 … Representatives of other financial institutions are concerned that this will result in an environmental race to the bottom, in that Chinese banks will finance projects that were rejected by other financiers due to their unacceptable environmental impacts. There is ample anecdotal evidence to suggest that borrowing governments use the fact that Chinese financiers do not set high benchmarks to put pressure on the benchmarks set by other financial institutions.”Footnote 128
Furthermore, former World Bank President Paul Wolfowitz stated that many Chinese MNCs do not apply the Equator Principles when financing projects.Footnote 129 However, it is been argued that Chinese MNCs are becoming involved in CSR initiatives in China and host countries.Footnote 130 Unlike in the west, the major driver behind CSR activity in China is the government, which is a major stakeholder.Footnote 131 For example, in 2008, the state-owned Assets Supervision and Administration Commission of the State Council published the “CSR Guideline for Central State-owned Enterprises”, in which companies are supposed to attain the following aims: “long term business success and payment of taxes, ethical behaviour, safeguarding workers’ rights and interests; protecting the environment, and contributing to social welfare through philanthropic spending”.Footnote 132 Furthermore, Chinese MNCs have adopted international standards such the Global Reporting Initiative's Sustainability Reporting Guidelines and ISO environmental management standards.Footnote 133 Furthermore, the Global Compact China Network was initiated in November 2011 in Beijing as a platform for Chinese participants in the UN Global Compact and their subsidiaries; it currently has 272 participating Chinese firms.Footnote 134
Another inherent weakness in the self-regulatory framework in Nigeria's oil and gas sector is the near absence of independent verification and enforcement mechanisms, so many MNCs engage in self-monitoring and auditing of their codes.Footnote 135 Thus, in Nigeria, the services of auditors and professional monitors are not used by MNCs in the oil and gas sector. However, Total appears to be an exception to this trend. Total posits that “to ensure compliance with our code of conduct, we ask an independent third party, Good Corporation, to conduct ethical assessments of our operations every year”.Footnote 136 The assessment addresses issues such as business integrity, labour standards, the environment and human rights.Footnote 137 Assessments have been conducted in Angola, Uganda, Tunisia, South Africa and Algeria among other countries.Footnote 138 A major criticism of Total is that, notwithstanding that Total is a major player in the Niger Delta, which is a theatre of environmental degradation occasioned by the activities of MNCs, it is yet to conduct an assessment of its code of conduct in Nigeria.
Multi-stakeholder codes of conduct
Multi-stakeholder codes are distinct from private or internal codes and this distinction is responsible for their popularity among oil MNCs (in comparison with private codes).Footnote 139 Multi-stakeholder codes arise from collaboration among a diverse range of actors including states, NGOs, MNCs and even academic scholars.Footnote 140 NGOs have played major roles in the development of multi-stakeholder codes. For example, the VPSHR, which were initiated by the UK and US governments, were the product of collaboration and negotiation among governments, oil MNCs, NGOs and others.Footnote 141 Thus, the VPSHR are an example of a multi-stakeholder initiative.
Many western MNCs including Shell and Total have signed up to the initiative. For example, to protect its facilities from oil sabotage and other criminal activities, Total employs armed private security personnel in exceptional cases (where there is a considerable risk of terrorism or a high crime rate).Footnote 142 Furthermore, Total avers that it embeds the VSPHR in such circumstances.Footnote 143 This article contends that the VSPHR is just another initiative that has had no positive impact on the people of the Niger Delta. For example, Shell is notorious for its use of both private and state security personnel in the Niger Delta to quell disturbances; this has led in some cases to the levelling of human rights abuse allegations on Shell and its security personnel.
Transparency mechanisms in Nigeria's oil and gas sector
EITI is another international mechanism that has been localized in Nigeria's oil and gas sector. Oil MNCs that have signed up to it include the Chevron Group, BG Group, Shell, Statoil, Total, CNOOC (China) and ONGC (India).Footnote 144 The EITI board designated Nigeria as EITI compliant on 1 March 2011. NEITI has a secretariat headed by an executive director and a governing board. The objectives of the NEITI Act 2007 include ensuring due process and transparency by extractive companies to the coffers of Nigeria's federal government, monitoring and ensuring accountability in revenue receipts of the federal government, and elimination of corrupt practices in the payment process in the extractive industry.
In furtherance of its objectives, NEITI has carried out regular audits of the Nigerian extractive sector. The aim of such regular audits is to reconcile the amounts companies pay to the federal government and the amount the government postulates it receives from the companies.Footnote 145 Since NEITI's inception in Nigeria, five phases of audits have been conducted, all in the oil and gas sector.Footnote 146 The periods covered by the various audits were 1999–2004 for the first audit, 2005 for the second, 2006–08 in respect of the third, 2009–11 in respect of the fourth and 2012 in respect of the fifth.
The first audit report was the first financial and physical analysis of the tax receipts or payments by oil MNCs operating in Nigeria for the period 1999–2004. This initial report alluded to a discrepancy in the amount of money paid by the oil companies and the amount the government said it received, amounting to $300 million.Footnote 147 This amount was subsequently reconciled to about $6 million, in other words, unaccounted for.Footnote 148 Thus, political pressure was applied by the Nigerian government to the NEITI board to reconcile the differences in the payment receipts or amounts declared.
The third NEITI report (2006–08) also highlighted numerous issues that called for urgent attention and action by all stakeholders. For example, the discrepancies in the amounts paid and received were excessive. A plausible reason for the anomalies in the payments of revenue was the lack of co-operation by the various entities involved in the process.Footnote 149 The second audit report (2005) also states that “NEITI will ensure that the benefits due to the Nigerian government, agencies and above all the people of Nigeria, from the industry duly accrue to them, in accordance with the principles of transparency, accountability, and sustainable development … NEITI will facilitate this process of remediation, working in collaboration with all stakeholders”.Footnote 150 Thus, publication of such reports promotes accountability and transparency in Nigeria's oil and gas sector.
In March 2012, a fourth audit was commissioned by NEITI and conducted on Nigeria's oil and gas industry.Footnote 151 One objective of the audit was to promote and maintain transparency and accountability in the sector. This audit covered the period between 2009–11. The major aim of this audit was to “review and reconcile all revenues collected by Government Agencies on behalf of the Federation and payments made by all the oil and gas companies operating in Nigeria, in line with international standards and rules of the Extractive Industries Transparency Initiative”.Footnote 152
The audit report was submitted on 18 December 2012 and was entitled “Nigeria Extractive Industries Transparency Initiative: Financial flows reconciliation report: 2009–2011 oil and gas audit”.Footnote 153 This report was scathing of the performance of the Nigerian National Petroleum Corporation (NNPC). It accused the NNPC of failing to remit billions of dollars to the coffers of the Nigerian government. For example, “[a] breakdown of the revenue lost to the activities of the NNPC as contained in the report showed that financial flows from the Nigeria Liquefied Natural Gas (NLNG), including dividends and repayment of loans, of which $4.84 billion was received by the NNPC, was not remitted by the Corporation.”Footnote 154 The revenue that accrued to the federal government in the period under review included the proceeds of crude oil business, royalties, gas flaring penalties and petroleum profit.Footnote 155 The major companies covered by the audit included the major MNCs in Nigeria's oil and gas industry, such as Shell, Agip, Total and Chevron, and agencies of the federal government such as the NNPC, Department of Petroleum Resources, Central Bank of Nigeria and Federal Inland Revenue Services. According to NEITI chairman, Dr Ledum Mitee, some oil and gas firms such as NECONDE Energy Ltd, SEPTA Energy Ltd, Emerald Energy Resources and Energia Ltd declined to participate in the audit process.Footnote 156 Dr Mitee posited that appropriate sanctions will be meted out to the recalcitrant companies that declined to participate in the audit process.Footnote 157
Before the advent of NEITI, payment or oil revenues accruing to the federal government were shrouded in secrecy. NEITI audit reports have been the major catalyst in enhanced transparency of Nigerian government activities in the oil and gas sector. Without the publication of the reports, Nigerians and other stakeholders “would have little information on the size of the sector or the nature and extent of problems and challenges that exist in the management of revenue streams from it”.Footnote 158 By publishing the various audit reports, NEITI has improved access to information and this will encourage transparency in the management of oil revenue receipts by the federal government in Nigeria.
However, NEITI is said to be “increasingly becoming toothless and institutionally moribund”.Footnote 159 The fourth NEITI report was heavily criticized by NNPC. In a statement widely circulated by the NNPC in Nigerian newspapers and on the internet, NNPC rebutted the contention of the fourth audit report regarding the discrepancies in the amount remitted to the federal government. NNPC posited that “NEITI without taking cognizance of the extant laws and regulations, guidelines and terms of relevant contracts in NNPC's operations has continued to portray the Corporation [NNPC] to the public in bad light”.Footnote 160
This article contends that a major flaw in the fourth audit report can be deduced from a letter written by the accountants who conducted the audit to NEITI's executive secretary and attached to the audit report. In the second paragraph of the letter, the accountants aver that the audit report or “engagement” was conducted “in accordance with the International Standard on Related Services applicable to agreed-upon procedures engagements”.Footnote 161 Paragraphs three and four of the letter circumscribe this assertion. These paragraphs are quoted here in full to illuminate this argument:
“We set out our findings in [sic] report including its appendices. Because the procedures were not designed to constitute an audit or review made in accordance with International Standards on Auditing or International Standards on Review Engagements, we do not express any assurance on the transactions beyond the explicit statements set out in this report. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
Our report is solely for the purpose of informing the National Stakeholder Working Group on the matters set out in the terms of reference and is not addressed to any other party or to be used for any other purpose.”
These paragraphs can be utilized by interested stakeholders to water down the effect of the audit process and this will serve as a disincentive to accountability and transparency in Nigeria's oil and gas sector. Corruption in the oil and gas industry and lack of political will on the part of the government to implement the NEITI audit reports are among other inherent difficulties that have accentuated the conundrum. Furthermore, similar assertions (in paragraphs three and four of the fourth audit report) are repeated in the fifth NEITI audit report which was presented in March 2015.
Notwithstanding the criticisms of the audit reports highlighted in this section of this article, the reports have had a positive impact in enhancing and promoting transparency in government revenues or receipts in the oil and gas sector in Nigeria. The audit reports between 1999 and 2011 had revealed a total revenue loss of $9.8 billion to the Nigerian government accruing from companies “as a result of underpayments, underassessment of taxes, rents and royalties”.Footnote 162 However, NEITI, working with other government agencies, has recovered $2.4 billion and the present administration of President Buhari has promised to implement the findings and recommendations of the various NEITI audit reports.Footnote 163
RECOMMENDATIONS
This article now proffers some solutions to ameliorate the ineffective self-regulatory model in Nigeria's oil and gas sector.
A major defect of the extant self-regulatory model is the apparent neglect of the culture and way of life of the people of the Niger Delta in the various codes of conduct. For example, the people of the Niger Delta have a strong sentimental attachment to their environment, especially land. None of the codes of conduct expressly provides for the sustenance of such environmental sentiments. One suggestion is that codes of conduct in Nigeria's oil and gas sector should localize or seek to protect such cultural sentiments of the people. Here, protection of the environment in the Niger Delta will be akin to sustaining the way of life or culture of its communities.
Soft law should be developed in Africa or Nigeria. There is so much recourse to the western manifestation of soft law, thereby neglecting core African or Nigerian values in the codes of conduct in operation in the sector. In this regard, it is contended that the African Charter on Human and Peoples’ Rights (African Charter) should be used as a template by oil MNCs in developing codes of conduct in Nigeria. For example, the African Charter promotes a plethora of rights.Footnote 164 If the various codes of conduct contained provisions emanating from the African Charter, it could be contended that NGOs and interested parties could file cases in Nigerian courts or regional courts against the MNCs for failure to enforce such values. Furthermore, Nigerian NGOs should develop codes of conduct incorporating African traditions and ideals, such as respect for the environment and philanthropy, because the extant codes do not reflect the Nigerian reality and are based on western models.
The African connotation of CSR (which differs from the western conceptualization) appears to be neglected in the extant literature on CSR and self-regulation. Philips contends that Africa (or Nigeria)'s strong communal kinship, collective approach to dispute settlement and philosophy, among others, presuppose that Africans were an “inherently socially responsible race of people”.Footnote 165 He further argues that, in Africa, the motivation for CSR comes from the institutional failure of the government, unlike in the USA and Europe where government pressure on MNCs shapes CSR initiatives.Footnote 166 However, there is much emphasis by scholars on the manifestation of western CSR or self-regulatory practices in Nigeria's oil and gas sector, thereby neglecting local influences. There have been some CSR or soft law standards enunciated by (regional) authorities in Africa to which MNCs should adhere. For example, in 2008 the African Union “announced its decision to facilitate the private sector's critical role in promoting Africa's regional and continental integration agenda”.Footnote 167 In 2010, African leaders enunciated a gamut of standards known as the Monrovia Principles.Footnote 168 These principles were a response by African leaders to the western centred notions of the prevailing CSR standards in Africa. Thus, the Monrovia Principles are standards enunciated by African leaders for MNCs operating in Africa to localize in their operations. The Monrovia Principles promote six core principles: growth partnership, encouraging entrepreneurship, ensuring stability and inclusive ownership, government acting as a good citizen, business as a good citizen, and support or reach of businesses.Footnote 169 However, the Monrovia Principles also seek to promote philanthropy as a core of CSR standards in Africa. Notwithstanding the slant of the Monrovia Principles towards philanthropy, they are a good starting point for the creation of codes reflecting the African experience.
One way of improving the extant codes or self-regulatory framework in Nigeria is that codes or soft law standards should be incorporated into agreements between MNCs and communities.Footnote 170 This will give a semblance of legality to such codes, which will deter MNCs from disregarding the codes whenever they deem fit. However, it should be noted that agreements entered into between MNCs and communities are not legal contracts.Footnote 171 Such agreements are referred to as memoranda of understanding (MOUs) in the Nigerian oil and gas industry. Notwithstanding that MOUs are not sacrosanct, Niger Delta communities consider them to be binding and oil MNCs are expected to enforce them. Thus, Niger Delta communities and NGOs aver that MOUs should be considered as contracts, for example as an intention to create binding commitments on the part of oil MNCs towards the inhabitants of oil-producing communities. Recently, the Ugborodo community in Delta State in the Niger Delta threatened legal action against Chevron Nigeria for failing to actualize its mandate under a 2002 MOU entered into with the community.Footnote 172 The community contended that the 2002 MOU enjoined Chevron inter alia to build blocks of classrooms and community centres, provide employment to the inhabitants and provide bursaries to students in community secondary schools.Footnote 173 Arguably, Chevron has failed to actualize the obligations flowing from the MOU. Thus, the community posited that:
“Your [Chevron Nigeria] undertaking under the Memorandum in question is to cover a period of five years from 2002–2007 and this means that all the stipulations under the Memorandum that remain unfulfilled are still alive and binding, even after the said years till date … Consequently, we here demand by this petition that you honor and perform all your obligations under the Memorandum of Understanding …”Footnote 174
The community further averred that it would institute court action against Chevron to compel it to implement the MOU.
Oil MNC self-regulatory initiatives or codes should promote the reduction of poverty in the Niger Delta region. For example, the World Bank Extractive Industries Review enjoined MNCs to contribute to sustainable development and poverty alleviation by, among others, consulting with communities on the impact of projects, obtaining consent from communities, including public health initiatives in their projects and sharing revenue with communities.Footnote 175
Self-regulation is said to be “an appropriate regime for the legal treatment of environmental issues”.Footnote 176 However, many oil MNCs in Nigeria aver that they do business as responsible members of society and one notable advocate is Shell. Shell's Business Principles include “giving proper regard to health, safety and environment … manage all social impacts of our business activities carefully and work with others to enhance the benefits to local communities”.Footnote 177 However, evidence in the Niger Delta does not support this assertion. A few examples will suffice. Shell accepted liability for two major oil spills in the Bodo Community in the Niger Delta region during the course of a class action instituted against Shell by the community.Footnote 178 Also, the United Nations Environment ProgrammeFootnote 179 recently posited that Shell, through its Nigerian subsidiary SPDC, is responsible for the massive oil spills and environmental degradation in Ogoni Land in the Niger Delta. Furthermore, a court in the Netherlands has held Shell's subsidiary in Nigeria liable for environmental degradation in a community in the Niger Delta.Footnote 180 Oshionebo argues that there is no incentive in Nigeria for oil MNCs to self-regulate, due to the lack of credible economic, legal or social sanctions by the government.Footnote 181 Thus, he posits that activism of civil society groups used in tandem with effective public regulation will address the ills of poor regulatory practices in Nigeria.
One model for curing inadequacies in the extant command and control regulatory framework in Nigeria is that “enforced self-regulation” should be adopted. Braithwaite contends that “[u]nder enforced self-regulation, the government would compel each company to write a set of rules tailored to the unique set of contingencies facing that firm. A regulatory agency would either approve these rules or send them back for revision if they were insufficiently stringent.”Footnote 182 This might not be achievable in the Nigerian context. Arguably, pervasive corruption in the Nigerian environment might stifle effective government participation. However, if independent agencies such as the Nigerian Human Rights Commission are given the task to write such guidelines, this will bring the elements of transparency and accountability into an enforced self-regulatory process. Furthermore, NGOs or civil society actors could be used to plug the gaps. Also, NGOs should be utilized by government agencies to create guidelines, or NGOs could institute or file a private member's bill at the National Assembly, seeking statutory backing for guidelines. Furthermore, through the use of public campaigns, NGOs can compel MNCs to adopt guidelines. Thus, an NGO enforced self-regulatory framework is more suitable for the Nigerian legal environment than an industry-led regulatory framework.
CONCLUSION
The premise of this article has been that the extant self-regulatory framework in Nigeria's oil and gas sector is ineffective. MNCs prefer to engage in self-regulatory mechanisms rather than a system based on sanctions akin to an effective public regulatory paradigm. This article focused on the existing international self-regulatory paradigm and its localization by oil MNCs in Nigeria's oil and gas sector. Self-regulation by oil MNCs in Nigeria is prevalent. It is said that various variants of self-regulation practices in Nigeria are for self-aggrandizement by the oil MNCs, invariably for self-promotion, and so that such firms will be seen by the public as socially or ethically responsible. The extant self-regulatory regulatory framework in the oil and gas sector is beset by many ills. One way of redressing the situation will be the localization of the views and aspirations of the oil producing communities in the self-regulatory framework in Nigeria's oil and gas industry. If the views of the oil producing communities are localized in self-regulatory measures in Nigeria, the legitimacy and credibility of the regulatory process will be enhanced.
