21.09.2009Rio Tinto’s and BP’s recent brushes with the law show the limits of how far companies can protect staff in dangerous parts of the world
In July, the Chinese ambassador was summoned twice to the Australian foreign ministry to be pressed for details of the detention of Rio Tinto’s top iron ore salesman in China and three other staff accused of spying. Stern Hu, an Australian, and the three others were detained in Shanghai, accused of stealing state secrets and bribing Chinese steelmakers. They each face up to seven years in jail if found guilty.
Meanwhile in Azerbaijan, BP, the country’s largest foreign investor, is making representations to the authorities following the arrest and detention of one of its local public relations team. Adnan Hajizade and a colleague have been held by police since early July.
These cases obviously differ in one important regard. Rio Tinto’s Stern is an Australian national, while Hajizade is an Azeri national. Yet both raise the question of what companies can do to protect their employees in the less-savoury parts of the world.
Many companies that operate in dangerous parts of the world employ heavy security protection for their staff and assets. Employees live in well-guarded compounds and in some cases are airlifted in and out rather than travel on dangerous roads.
Most companies also carry hefty kidnap and ransom (known as “K&R”) insurance, which provides access to specialist negotiators to secure the safe return of employees and materiel seized by warlords, pirates or other undesirables. Such negotiators have been very busy in recent months, given the spate of ship hijackings off the coast of Somalia, for example.
Coping with government
Of course, none of these safeguards is much use when the source of the problem is the authorities of the country where the company is working, as in the recent BP and Rio cases. In both situations, the employees were detained by legitimate government agencies, not criminal entities.
One would certainly not want to advocate that employees of international companies should be immune to the laws of the countries where they work. Take Iraq. There, western contractors were immune from arrest under almost any circumstances. This meant that even in the infamous Blackwater incident of September 2007, when the US private military company’s personnel killed 17 Iraqis in a skirmish in Baghdad, those involved were not subject to Iraqi law.
The simple truth therefore is that the sort of situation in which BP and Rio now find themselves is an unfortunate but almost inevitable corollary of doing business in countries such as China and Azerbaijan. Both countries have authoritarian regimes and are both inclined to use their legal and security apparatus as a tool of state policy.
BP and Rio are among the world leaders when it comes to understanding the risks inherent in the countries where they operate, and provide appropriate training and support to their staff; other companies are less good. The fact that even the best can still face difficulties should demonstrate to all companies seeking to operate in emerging markets the importance of a proper understanding of country political and security risk.
In July, the Chinese ambassador was summoned twice to the Australian foreign ministry to be pressed for details of the detention of Rio Tinto’s top iron ore salesman in China and three other staff accused of spying. Stern Hu, an Australian, and the three others were detained in Shanghai, accused of stealing state secrets and bribing Chinese steelmakers. They each face up to seven years in jail if found guilty.
Meanwhile in Azerbaijan, BP, the country’s largest foreign investor, is making representations to the authorities following the arrest and detention of one of its local public relations team. Adnan Hajizade and a colleague have been held by police since early July.
These cases obviously differ in one important regard. Rio Tinto’s Stern is an Australian national, while Hajizade is an Azeri national. Yet both raise the question of what companies can do to protect their employees in the less-savoury parts of the world.
Many companies that operate in dangerous parts of the world employ heavy security protection for their staff and assets. Employees live in well-guarded compounds and in some cases are airlifted in and out rather than travel on dangerous roads.
Most companies also carry hefty kidnap and ransom (known as “K&R”) insurance, which provides access to specialist negotiators to secure the safe return of employees and materiel seized by warlords, pirates or other undesirables. Such negotiators have been very busy in recent months, given the spate of ship hijackings off the coast of Somalia, for example.
Coping with government
Of course, none of these safeguards is much use when the source of the problem is the authorities of the country where the company is working, as in the recent BP and Rio cases. In both situations, the employees were detained by legitimate government agencies, not criminal entities.
One would certainly not want to advocate that employees of international companies should be immune to the laws of the countries where they work. Take Iraq. There, western contractors were immune from arrest under almost any circumstances. This meant that even in the infamous Blackwater incident of September 2007, when the US private military company’s personnel killed 17 Iraqis in a skirmish in Baghdad, those involved were not subject to Iraqi law.
The simple truth therefore is that the sort of situation in which BP and Rio now find themselves is an unfortunate but almost inevitable corollary of doing business in countries such as China and Azerbaijan. Both countries have authoritarian regimes and are both inclined to use their legal and security apparatus as a tool of state policy.
BP and Rio are among the world leaders when it comes to understanding the risks inherent in the countries where they operate, and provide appropriate training and support to their staff; other companies are less good. The fact that even the best can still face difficulties should demonstrate to all companies seeking to operate in emerging markets the importance of a proper understanding of country political and security risk.
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