Rights and Wrongs - Where Does the Buck Stop?

Last week, Bank of America announced that it would no longer lend to companies that run the controversial centres where the United States Government is detaining refugees and migrants who have entered the country without proper documentation  (such as Caliburn, CoreCivic and Geo Group).

Two-thirds of those currently detained are in facilities run by private corporations.

Background

People have the right to leave their country and the right to return to their country, but they do not have the right to enter countries of which they are not citizens. Countries have the right to set rules about who may enter a country and who may not, but they have an obligation not to send people who have well-founded fear of persecution back to the country they are leaving. While processing asylum claims, if the receiving country holds people in a temporary facility, that is not illegal under international law, but the asylum-seekers are still entitled to their basic human rights. They should never be subject to inhumane or degrading treatment, for example, and the detention of children and separating them from their families, in particular, raises many concerns.

“We have decided to exit the relationship,’’ Bank of America vice chairman Anne Finucane said. According to one report, Bank of America is the main financier for Caliburn, to which it has provided a loan of $380 million and a line of credit of $75 million.

What the banks know or should have known, and if they enable a company to continue operating as it does, are important concerns.

Some 2,300 unaccompanied minor children are being held at a facility run by Caliburn in Homestead, Florida. In a statement, the bank added:

“The private sector is attempting to respond to public policy and government needs and demands in the absence of long-standing and widely recognized reforms needed in criminal justice and immigration policies. Lacking further legal and policy clarity, and in recognition of the concerns of our employees and stakeholders in the communities we serve, it is our intention to exit these relationships.”

Bank of America is not the first financial institution to withdraw from companies running detention centres. Earlier, JP Morgan Chase and Wells Fargo reached a similar conclusion for corporations seen as facilitating a harsh policy that millions of Americans find morally repugnant. Two-thirds of those currently detained are in facilities run by private corporations. US Representative Alexandra Ocasio-Cortez has called the centres “concentration camps”, for which she was criticised, but she was not entirely off the mark. The term gained wider recognition during World War II when the Nazis established such camps, but their origin dates back to the Boer War. Another term critics have used to describe the camps in the United States is internment camps. The US Administration insists that holding undocumented individuals at such centres is the only way it can stem the tide of migrants seeking to enter the United States.

Privatising Rights-Based Duties

Nothing in human rights law prevents private organisations such as the companies named above from providing services the state has an obligation to ensure the provision of, but they must adhere to international standards, norms and laws.

Human rights organisations have frequently criticised privately-managed detention centres and prisons. If rights are being abused in such facilities, besides the state, the contractor running the centres too bears responsibility. Companies and financial institutions which enable contractors to operate – and that includes banks – are exposed to the risk of being complicit. To mitigate that risk, banks are expected to use leverage to change the behaviour of clients. But if they cannot, they must choose between being implicated or withdrawing from that business. And Bank of America has chosen to withdraw.

Bank of America’s decision was announced the same week workers at Wayfair, a company that manufactures furniture, furnishing, and other products for homes, walked out of their plant because the company was supplying products to the US detention centres. Wayfair’s workers expressed outrage over the business and asked that profits be turned over to charities. The company said it would donate $100,000 to the American Red Cross.

If rights are being abused in such facilities, besides the state, the contractor running the centres too bears responsibility.

To be sure, neither company is directly responsible for the abuses the migrants are subjected to – that responsibility rests squarely with the US Government and its supervisors whose job it is to ensure that the privatised contractor acts in accordance with the law. But Wayfair’s workers and Bank of America’s executives have shown that they are aware of the risks of being associated with grave abuses. In itself, that is a noteworthy step.

Banks' Human Rights Responsibilities

There is no one ‘right’ answer for what companies should do in similar circumstances.

While banks do not run businesses that are accused of committing human rights abuses, they provide finance which allows those businesses to operate. What the banks know or should have known, and if they enable a company to continue operating as it does, are important concerns.

Courts have considered these matters in the past and bank conduct has been examined and prosecuted in the Nuremberg Tribunal. If banks know, or should have known the consequences of their actions, they may become liable. (Handling questionable assets can also be risky for banks.)

The question is not whether a company stays or goes; the more important question is why a company chooses to stay or go, and whether respecting or advancing human rights is part of its decision-making matrix.

Recognising their responsibilities, banks in some jurisdictions have begun addressing human rights concerns. For example, in the Netherlands, the Dutch Banking Sector Agreement on Human Rights brings together eleven Dutch banks with civil society groups, trade unions, and the government to work together so that the banks can meet their human rights responsibilities. Besides, BankTrack has developed a human rights benchmark on which it measures 50 large banks around the world across 14 criteria drawn from four categories, including human rights policies, due diligence processes, reporting on impacts, and approach to remedying impacts.

In spite of these precedents, the Thun Group of banks asserted in a discussion paper in 2017 that banks do not cause or contribute to the adverse impacts that may arise from their clients’ operations. Civil society and human rights groups challenged that assertion, along with the author of the UN Guiding Principles on Business and Human Rights, Professor John Ruggie.

Societal expectations are also rising: the Dutch National Contact Point under the Organisation of Economic Cooperation and Development said in April this year that a Dutch Bank should formulate concrete climate goals under the Paris Climate Agreement.

Should I Stay or Should I Go?

To be sure, leaving a business relationship is to be considered carefully.

Companies that left South Africa during apartheid salvaged their reputation, but their departure did lead to some job losses in the country. Companies that stayed in spite of boycott campaigns exposed themselves to reputational risks, but those who adhered to the Sullivan Principles played a role in helping develop a cadre of managers from South Africa’s majority black community who were able to run businesses effectively once apartheid was over.

The question is not whether a company stays or goes; the more important question is why a company chooses to stay or go, and whether respecting or advancing human rights is part of its decision-making matrix.

For too long companies have expressed their helplessness over the human rights consequences of actions which they are not responsible for, but with which they are associated. The entities actually committing abuses often have legitimate authority to act (such as state security forces protecting an oil installation). What can a company, one or more steps removed from the act, do?

Companies' tolerance, acquiescence, encouragement, approval, support, or aiding and abetting specific acts makes them vulnerable to litigation and reputational damage.

Many companies face this dilemma.

Telecom companies providing technology that can be used for surveillance; oil companies operating in conflict zones whose assets are protected by trigger-happy security forces; brands selling cheap clothing made in sweatshops owned by manufacturers in developing countries and supervised by bureaucrats in those countries; extractive industries paying royalty to corrupt governments that siphon off funds abroad, instead of investing in resources to alleviate poverty at home.

In each of these instances, the company itself is not directly responsible for the abuses, but they linked - and face significant risks because of that. Their tolerance, acquiescence, encouragement, approval, support, or aiding and abetting specific acts makes them vulnerable to litigation and reputational damage.

The legal threat is real. Companies face real risks of prosecution – although the threshold for evidence in criminal cases linking a company with a specific abuse it may not have committed is high, making successful prosecutions rare.

Just as real is the threat to reputation. Companies that did business in apartheid-era South Africa, Sudan during its civil war, or Myanmar during military rule (or today in Rakhine), which invested in China soon after the Tiananmen Square massacre, or which operate currently in Occupied Territories in the Middle East or IS-held territory in Syria, have all faced credible threats of litigation, consumer boycotts, and investor pressure.

Bank of America may have calculated that these threats are simply not worth it.

A televised Congressional hearing would have had a far more adverse impact on the bank’s reputation than what it would have earned through banking fees. Regardless of its motive, the decision is an important marker – it sends a clear message to banks that providing finance to companies that act as government contractors carries risks, and how to calculate those risks is not an exact science.

Financial sector conduct is being scrutinised more than ever, and there are consequences for their choices.

Bank of America may have calculated that these threats are simply not worth it. Its decision sends a clear message to banks that providing finance to companies that act as government contractors carries risks, and how to calculate those risks is not an exact science.

Photo: Flickr/Peg Hunter