Global Witness report on amended Firestone agreement

Global Witness and the Save My Future Foundation have released a report assessing the amended agreement between Firestone and the Liberian government.

An agreement was signed in January 2005 (available here) under the transitional government, despite the fact that the previous agreement Firestone had signed was not going to expire for another 20 years. On the grounds that the transitional government did not have the power to negotiate concessions agreements, Sirleaf’s government renegotiated this agreement in February 2008 (available here). The report says that “despite appeals from local civil society for a three-month public review period, the Government proceeded to ratify the Amended Agreement after only two days of public consultation.”

This report is much more negative about the new Firestone agreement that the Global Witness report was on the renegotiated concessions agreement with ArcelorMittal. As much as I am against foreigners taking on Liberian government responsibilities (i.e. GEMAP), reading these Global Witness reports has convinced me that there is a role for outsiders to play in assisting the government with negotiating concessions agreements. (In fact I think foreigners did assist the government with this amended agreement. I’m not sure why they didn’t catch some of the things listed below. Or maybe they did, and the government wasn’t in a strong bargaining position.) There are legal loopholes that multi-national companies know about, but a developing country may not fully realize the implications of these provisions. Some of the noteworthy parts of the report are below. In some bullets I copy chunks of text directly from the report.

• In the 2005 agreement, the US-based parent company of Firestone Liberia was stated to be “joint and severally liable”. This is no longer the case. As a consequence of this change, if in the future Firestone Liberia is unable to pay compensation or meet its obligations under the Amended Agreement, the US parent company will not be required to step in and fulfill its subsidiary’s obligations under the contract.
• A confidentiality clause gives the government and Firestone Liberia broad discretion when deciding what is and is not confidential. Payments from Firestone Liberia to the government could be considered confidential.
• The Amended Agreement is in place until 2041. Until then the Government cannot alter the 30% corporate tax payable by the company, the amount of rent charged for land used, apart from adjustments due to inflation, and cannot increase the requirement that the workforce comprises at least 50% Liberian citizens.
• A clause states that any new laws introduced by the government are not binding on Firestone Liberia. This is important in light of the fact that there is general agreement that many of Liberia’s laws need to be updated. The Ministry of Labor has noted that existing labor laws are out of date.
• The new agreement states that access to arbitration is limited to the parties to the agreement (the government and Firestone Liberia) and cannot be brought by affected third parties (i.e. a Firestone employee who wants to sue because Firestone Liberia did not meet its contractual obligation of building one well per 30 houses). The affected party would have to rely on the government to take up the cause. But this can only take place in front of an international arbitrator, not in the national courts of Liberia. Because international arbitration is expensive and time consuming, it is likely this route will not be taken unless there is a large problem.
• In the Amended Agreement, the PPD has been given powers to “apprehend, detain, search and exclude or evict unauthorised persons from the Production Area, and from such other areas …”. This may entitle Firestone Liberia to direct the PPD to evict community protesters, who may be protesting against damage to their local environment.
• A contractual provision also gives Firestone Liberia the right to put “reasonable restrictions” on the use of farm roads in the interests of company security of assets. By implication, community use of the roads is secondary and could become a potential source of abuse of the rights of the local population. As reported in SAMFU’s report, “The Heavy Load”, Firestone Liberia allegedly disconnected community roads by digging trenches to prevent community members from traveling along them.
• A provision commits the company simply to abide by the same standards as all other businesses observe elsewhere in the country. In a post-conflict country like Liberia, investment is likely to come from smaller and less reputable companies that may not employ as strict environmental standards as those used by larger or more responsible/established companies.
• Force majeure clauses should be limited to a discharging event which was not “reasonably foreseeable” such as natural disasters, terrorism etc. However, the force majeure clause within the Amended Agreement entitles the Parties to consider themselves discharged from contractual obligations in instances including “strikes or other industrial, labor or employer-employee disputes”.