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Question mark over legal status of Royal Dutch Shell Business Principles

FROM OUR SEPT 2005 SHELL NEWS ARCHIVE

Question mark over legal status of Royal Dutch Shell Statement of General Business Principles

“The development may also be of interest to the Rossport Five jailed in Ireland at Shell’s behest after making a stand on environmental grounds.”

Friday 9 September 2005: 10.00am ET

By John Donovan

Comments in an important judicial handbook recently 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 Statement of General Business Principles (SGBP) which solemnly pledge honesty, integrity and transparency in all of Shell’s dealings. The SGBP is specifically cited in the relevant comments.

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”

“A growing number of guidelines or codes of conduct have been developed within industry, including… 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 letter from a Shell in-house barrister, Richard Wiseman (shown right), now General Counsel of Shell International Petroleum Company Limited, is extremely revealing in regards to Shell’s opinion of the legal status of the SGBP: –

Richard Wiseman, Royal Dutch Shell

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 dates from several years ago Mr Wiseman confirmed in an email last year that Shell’s 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 that is exactly what has happened. The potential repercussions are significant for Shell and other multinational corporations who use ethical codes to promote confidence and encourage investors/stakeholders on an international basis.

Former employees, such as Dr John Huong, currently in litigation with Shell, may discover that they have grounds to expand their claims against Shell.

The development may also be of interest to the Rossport Five jailed in Ireland at Shell’s behest after making a stand on environmental grounds.

If Mr Wiseman wishes to clarify the situation, his comments will be added to this article exactly in the form provided i.e. with no editing.

(NO SUCH CLARIFICATION WAS RECEIVED FROM MR WISEMAN, WHO SUBSEQUENTLY BECAME CHIEF ETHICS & COMPLIANCE OFFICER OF ROYAL DUTCH SHELL PRIOR TO HIS RETIREMENT LAST YEAR.)

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