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Shell General Business Principles: a confidence tricksters charter

Shell General Counsel Richard Wiseman 

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.”

http://www.shell.com/static/envirosoc-en/downloads/making english.pdf

Background

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.

http://www.unep.org/law/PDF/JUDICIAL_HBOOK_ENV_LAW.pdf

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.

Yours sincerely
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.

1 Comment on “Shell General Business Principles: a confidence tricksters charter”

  1. #1 Bill Campbell
    on Feb 15th, 2008 at 10:35

    These comments relate only to the UK and only to health and safety of employees at work whether these employees are employed directly by Shell or indirectly

    Far be it from me to question Mr Wiseman but in relation to the UK and the obligations of a Duty of Care Holder (such as Shell) under the various provisions of the Health and Safety at Work Act then he is in my humble opinion wrong if he thinks that the SGBP will not, or could not be used in a British Court, or if he thnks the SGBP are not legally binding.

    The debate would focus around the word ‘govern’, see the following extract from the SGBP

    The Shell General Business Principles ‘govern’ how
    each of the Shell companies which make up the Shell
    Group* conducts its affairs.

    Govern in this respect means that the persons who are ultimately responsible (Chairman and CEO) must by the fact that they have issued the SGBP into the publc domain be able to demonstrate that the governance process was effective after the fact i.e have a system of essential management controls in place to ‘govern’ the Company and in such a way that it meets those parts of the SGBP which relate to mandatory requirements in the area of the world where the Shell Operating Unit functions.

    If this system was seen under public inquiry to have failed after an undesirable event say causing loss of life then the Chairman and CEO could be held accountable using the SGBP because compliance with that was their responsibility and not that of a technician say on Brent Charlie.

    Where I agree with Wiseman is that the SGBP could and perhaps should not be used in Law where the commitments are aspirational, perhaps related to values but it most certrainly be valid when it gives commitments related to Policy and which after the event that Policy was verified to have been knowingly violated

    For example it is policy as stated in the SGBP in relation to employees ‘to provide them with good and safe working conditions’ and to ‘give
    proper regard to health, safety’ And the SGBP infers because it is a governance process document that it will be the accountability of the signatory of the SGBP to ensure that ‘Shell companies have a systematic approach to health and safety etc’ audited from time to time by an audit process owned by the Governors.

    It should also be noted that in relation to Health and Safety, and as a direct result of the Shell plea of guilty to the unlawful killing of persons on Brent Bravo et all that the SGBP was re-drafted with another principle which is not an aspiration, a goal, but a mandatory requirement for every Duty of Care Holder in the UK not just Shell and that is the following

    Principle 8

    Compliance

    We comply with all applicable laws and regulations of
    the countries in which we operate.

    It is always best to give an example. North Sea operations are governed and controlled by the Government under the various requirements of the Health and Safety Work Act and the daughter legislation the Safety Case Regulations.

    Cormorant Alpha Safety Case for example is a mandatory demonstration of how the Duty Holder will comply with his binding requirements under Law, and was accepted on behalf of Society by the enforcing authority (HSE) and failure to do comply may result in prosecution or loss of License to operate.

    Now Cormorant Alpha Safety Case, as all other Safety Cases has a Safety Management System as a section of the document and the SMS refers to the corporate management system (CMS) and low and behold the CMS refers, yes you guessed right, refers to the group SGBP at the ultimate pinnacle of the organisation. So the SGBP are a part of the Safety Case of that there is no doubt and should not be a contegious issue.

    Now that this is said we may find that Shell alters all its Safety Cases in the UK to delete reference to SGBP because it is that reference that may eventually get Directors and the current CEO into Court (as SGPB signatory) when this country eventually gets around to putting into Law a proper system for handling Corporate negligence homocide

    rgds

    Bill Campbell

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