Update: 01.06.2011

Glencore illustrates the need for stricter legal guidelines

Up to now, the publicity-shy commodities trader Glencore was always able to avoid to cause too much disturbance on a legal and political level, despite business practices which are harmful to human rights. From now on, the top-selling Swiss enterprise (2010: USD 142 billion) will stand under increasing monitoring thanks to the effects of the flotation. But still, business experts do not believe that this will change a lot in the business practices of Glencore. It is for this reason that numerous NGOs call for the Federal Council to take the necessary steps to legally bind multinationals in the commodities sector to declare their sales and profits by means of «country by country reporting».

No taxes despite high commodity prices

In general, human rights and environment organisations talk poorly about giant Swiss trade and mining company Glencore. Some weeks ago, Bread for All and the Swiss Catholic Lenten Fund have launched a campaign which shows the irresponsible exploitation of natural resources by the company in Congo, without providing the slightest profit to the hands of the local population.

A bit later a subsidiary of Glencore mining for copper in Zambia, Mopani, got under severe pressure because, according to Bread for All and the Swiss Catholic Lenten Fund, when in the last year it evaded 124m USD of taxes, money urgently needed in a development country. Even though copper was listed at record heights on the commodities markets the company over the last few years has always shown losses and has never paid any corporate income tax.

Objection with the OECD

On 12 April 2011, together with partner organisations in Zambia, France and Canada, the Berne Declaration lodged an administrative appeal against Glencore with the National Contact Point for the OECD guidelines for multinational groups. In Switzerland, this institution is based with the State Secretariat for Economic Affairs (SECO). The Zug commodities giant faces accusations about massive manipulations and improper accounting in Zambia. The case in question is now being solved with by the company by means of conciliatory proceedings. If the National Contact Point registers a violation of the regulations, this is published in a message.

The case is of great importance not only because of the sheer size of Glencore, but also because Glencore is not the only company headquartered in Switzerland which plays such an eminent role in a global industrial sector. According to aid organisations there is no higher density in transnational companies in any other country worldwide.

According to the Swiss Catholic Lenten Fund, Switzerland is as interesting as headquarter for transnational companies since legal regulation on trusts is but weak. This enables these to skim off the profits from third states to Switzerland without having to pay taxes on them in their country of origin.

What changes is the flotation going to bring about?

Economic experts believe that, for Glencore, the flotation is a step into the bright light, since companies listed on the stock exchange are obligated to regularly publicise their gains and figures. Diverse financial newspapers therefor predicted that the commodities multi will come under increased pressure and in the Handleszeitung newspaper, a Zug commodities dealer was quoted «Glencore will be examined so carefully afterwards that it won’t be able to continue some of its practices». On Spiegel Online, Swiss journalist said «With its flotation, Glencore is at the centre of public attention».

The Berne Declaration, on the other hand, doubts very much that the way of doing business will change to the better now that Glencore stocks are traded, especially since CEO Ivan Glasenberg said himself that there will be no change in Glencore’s policies. This also applies to the highly complex structure of the group to avoid taxes – Glencore includes countless daughter companies – besides Xstrata, Minara and Century.

Postulations to Swiss politics

What would force Glencore to some more social responsibility, are stricter Swiss laws. The Berne Declaration, Bread for All and Swiss Catholic Lenten Fund therefor call for an obligation that all multinational trusts especially in the commodities sector have to declare their sales and profits – in «country by country reporting».

The Dodd-Franck Act passed in July 2010, similarly forces the US to publicly report on all petroleum, gas and commodities companies and, in future, list according to country of origin the tolls and taxes already payed to the governments of the respective countries of mining. This is a decisive legal step for authorities and NGOs towards revealing tax avoidance, the Swiss Catholic Lenten Fund writes in a study. The pressure for such measures is growing: in the beginning of February 2011, the parliament of the EU has asked the member states to introduce laws for «country by country reporting».

Revision of the OECD principles

In a report dated 21.4.2010 (COM/2010/0163, Art2.2.2) the European Commission advocated the introduction of the «country by country reporting» into the OECD guidelines which are at present revised. A first revised version shall appear in May 2011. Unfortunately, it is improbable that Switzerland (represented by SECO) will advocate the introduction of such a reporting, since in August 2010 the Federal Council stated in an answer to an interpellation that it considered the existing rules to be sufficient.

The NGOs also ask the Federal Council – within the framework of Swiss legislation - to search for a way to legally fix the obligation of due diligence for enterprises. Up to now, companies could not be held liable for human rights violations of their daughter companies, so Glencore is not liable for the practices of its Zambian daughter Mopani. This encourages irresponsible action and furthers human rights violations and will keep trusts like Glencore from voluntarily providing insight into unclear company structures.  

Documentation of the sources

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Media reports

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