Richard Wiseman,General Counsel M & A and Project Finance Shell International Limited
Article by John Donovan
Comments in an important judicial handbook published as part of the United Nations Environment Programme, imply that contrary to previous understanding, voluntary Codes of Conduct implemented by multinational corporations may be subject to rights of legal redress.
As a result, it appears that legal remedies for corporate misdeeds may have now reached the doorstep of Shell in relation to its Shell General Business Principles (SGBP) which include the following core principles: –
“Shell employees share a set of core values – honesty, integrity and respect for people. We also firmly believe in the fundamental importance of trust, openness, teamwork and professionalism, and pride in what we do.”
The publication of the Judicial Handbook on Environmental Law is in response to a request made by chief justices and other senior judges from some 100 countries for guidance on such issues. Two distinguished Professors of Environmental Law, Dinah Shelton and Alexandre Kiss, were asked to prepare the draft for judicial review by a team of eminent judges prior to publication. The Judicial Editorial Board responsible for the Judicial Handbook included Judge Christopher C. Weeramantry, Former Vice-President, International Court of Justice (Co-Chair) and Rt. Hon. Lord Justice Sir Robert Camwath, Judge, Court of Appeal, England and Wales (Co-chair).
The following are extracts from page 12 of the Judicial Handbook dealing with “Industry standards and codes of conduct”: The SGBP is specifically cited in the relevant comments.
f) Industry standards and codes of conduct
A growing number of guidelines or codes of conduct have been developed within industry, including the World Industry Council for the Environment, the FAO International Code of Conduct on the Distribution and Use of Pesticides, the Responsible Care Initiative of the Chemical Manufacturers Association, the CERES/Valdez Principles, the ICC Business Charter on Sustainable Development, and the Royal Dutch/Shell Group Statement of General Business Principles. Such private regulation may constrain behavior by exercising a moral or practical (sanctioning) influence. Litigants may argue that breach of such codes or industry standards may be evidence of malpractice or negligence, in an effort to deploy a relatively inexpensive means of evaluating conduct in case of a dispute.
A carefully constructed letter from a Shell in-house barrister, Richard Wiseman (now General Counsel M & A and Project Finance Shell International Limited) demonstrated the importance that Shell attaches to the legal status of the SGBP: –
Dear Mr Donovan
In your letter of 2 June you asked me whether we regard the statement of General Business Principles of The Royal Dutch/Shell Group of Companies to be legally binding.
I have consulted widely on the intention of those responsible for the drafting of the statement. They have confirmed that there was no intention to create a document for use in the courts. It was intended to lay down a code of behaviour by which we think we should be judged by the public at large and in this respect perhaps define higher standards than some other commercial organisations impose upon themselves. Our legal obligations are defined by specific contracts and the general legal principles applying in the relevant jurisdiction. We are subject to the same legal standards as apply to everyone else.
R M Wiseman
General Counsel & Company Secretary
Shell U.K. Limited
Although the letter is of fairly ancient origin, Mr Wiseman confirmed to us in an email on 22 April 2004 that Shell’s legal view of the SGBP remains as indicated in his letter.
What is seems to boil down to is that although Shell drafted the SGBP so that the principles were, like a bet with a bookie, binding in honour only, with no legal standing, the SGBP may in fact give grounds for legal redress in the event of a breach. Even if it was not Shell’s intention to create “a document” for use in the courts, it may be that this is exactly what happened. The potential repercussions are significant for Shell and other multinational corporations who use ethical codes to promote confidence and encourage investment in their shares.
References to the SGBP were used to boost the credibility of the false hydrocarbon proven reserves volumes filed with the U.S. Securities & Exchange Commission in Form 20-F Returns. They were also used in Shell Annual Accounts containing false information about proven reserves volumes.
Litigants suing Shell, or being sued by Shell, would be well advised to pass the above information to their lawyers, particularly if there is evidence that Shell has breached the SGBP in the matter being litigated.