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Companies, International Trade and Human Rights “We, the affluent countries and their citizens, continue to impose a global economic order under which millions avoidably die each year from povertyrelated causes.” (T Pogge, World Poverty and Human Rights (Polity Press, Oxford, 2002), quoted in Janet Dine’s preface, page ix.) This book focuses on the role of corporations within the trading system and the complex relationship between nation states, international organisations and transnational corporations. It seeks reasons why international trade is not meeting the objectives to be found in international trade agreements and human rights instruments. It investigates the reasons why, despite the globalisation of trade, even the minimum of basic human rights is not being achieved. In the first chapter questions are posed regarding the importance, influence and effect of transnational corporations, political institutions and the individual citizen in respect of globalisation, enrichment and human rights. Transnational corporations account for 70% of world trade and, therefore, are the major creators of wealth.Yet they stand accused in respect of the increased gap between rich and poor, environmental issues, labour www.journalonline.co.uk concerns, undue influence over international organisations, and distortion of governments’ priorities. The chapter concludes with consideration and rejection of Rawls’s “just difference principle”, namely that inequalities can be just. Chapter 2 adopts as its mantra Pogge’s assertion:“if such norms [of Enlightenment morality] are compelling enough, the strong make an effort to comply. But they also, consciously or unconsciously, try to get round the norms by arranging their social world so as to minimise their burdens of compliance”. It goes on to examine some of the most common devices for moral deflection, namely actions taken by institutions, companies and nation states; taking philosophies out of context; statistical (mis)representation; and use of language. Chapter 3 looks briefly at the major institutions which create the framework for world trade: the International Monetary Fund,World Bank and World Trade Organisation. In particular it examines the undue influence transnational corporations and international financial institutions exert upon them. It looks also at the lessons to be learned from the history of sugar production and from the slave trade to show that trade laws were (and still are) made to suit the economic interests of the powerful. Chapter 4 recognises that the primacy of nation states renders transnational corporations “invisible” to the constraints of international laws, including human rights laws. It examines whether there is any way by which transnational corporations can be brought under the jurisdiction of human rights laws and be subject to human rights responsibilities. It argues that it is necessary to evolve an agreed understanding of rights despite the often conflicting demands of civil, political, legal, social and economic rights. It is further argued that the International Monetary Fund, the World Trade Organisation, transnational corporations and international financial institutions require to accept their responsibilities regarding human rights or have them imposed upon them. Chapter 5 considers the philosophy of “corporate social responsibility”. Several questions are then posed. Is AUTHOR: JANET DINE PUBLISHER: CAMBRIDGE UNIVERSITY PRESS ISBN: 0 521 82861 9 PRICE: £50 a voluntary ethic sufficient? Does it contradict the purpose of corporations, namely to maximise the benefit to their shareholders? Can a corporation’s performance regarding human rights be measured? Finally, is it possible to regulate across different legal systems and, even if possible, is it desirable to do so? The final chapter considers property rights in the contexts of human rights and international trade. It compares attitudes to property rights in the US and across Europe. It asks whether a focus on property rights diverts attention away from the duties and responsibilities demanded by human rights and promotes domination by the few over the many. Finally it examines what is being done and what more could be done to further international co-operation and social responsibility. This book does not deal with legal practicalities and practice – nor is it so intended. It is an academic book, dealing with theories and principles. It is well researched and contains a plethora of quotations, references and substantive examples. It is thoughtprovoking and challenging, without providing substantial solutions. Damien Bechelli, Biggart Baillie, Glasgow BOOK REVIEW Please send any suggestions on future books to be reviewed to: Alistair Bonnington, The Law School, The Stair Building, University of Glasgow, G12 8QQ e: alistair.bonnington @bbc.co.uk The Journal: December 2005 : 57
property lawyer UNVEILING THE ISLAMIC MORTGAGE Islamic finance is a recent arrival on the Scottish banking scene. In this article GRAHAM BURNSIDE explains some of the background and looks at the questions raised by the introduction of Shari’a-compliant mortgages within the context of Scots law While Islamic banking and financial institutions have existed for many years, a substantial expansion of their size and scope has resulted from the rapid economic development of many Muslim states and the attendant growth of private wealth within them: worldwide they now have assets estimated at over £250 billion. Europe’s first purely Islamic retail bank – the Islamic Bank of Britain – opened its doors in London last year, and a number of our own high street banks have either already developed Islamiccompliant products or are considering doing so. HSBC, with its substantial Asian connections, has for example had its own Islamic division for some time. Asset-based return Islamic financial institutions derive their practice and procedures from the Shari’a, which might loosely be described as the Islamic canon law. From the financial perspective, its most significant impact comes in the form of prohibitions – on 58 : The Journal: December 2005 speculation or gambling (which extends to a general prohibition on standard insurance contracts), on investment in prohibited products such as alcohol, and (perhaps most widely known and certainly of most impact in this area) on the charging of interest or riba.“Interest” is only a rough translation of the term (it can also be translated more broadly as “usury”). It essentially looks to the concept that a profit should not be obtained from money itself but rather from the goods or activities in which money is employed: a lender’s return should therefore come from the assets or enterprise in which its finance has been invested and this should include an element of risk sharing. In a sense therefore all Islamic financing can be seen as a joint venture between the lender and the borrower. Probably the most significant development in the UK within the last few years has been the appearance of Islamic-compliant mortgage products. A number of these have appeared in the English market within the last few years, and my own firm last year undertook the development of what we believe is the first such mortgage product in Scotland. Routes to market While all of the existing English products seek to meet the Shari’a requirement mentioned above of involving the lender in the funded property, they do not all approach this by the same route. Indeed, a variety of recognised Islamic financing methods have been drawn upon.The most prominent of these are: ■ murabaha – this essentially involves the “lender” acquiring the asset and reselling it to the “borrower” at cost price plus return.The inflexibility of what is in effect fixed funding over the whole term of the “loan” is a significant practical limitation, however, and to my knowledge only one lending institution has adopted this structure. ■ ijara – “ijara” is the Arabic word for lease and at its simplest this structure equates to sale and leaseback.The majority of products in the English market have adopted variations on this theme. ■ musharaka – this is effectively a joint venture arrangement whereby both parties participate in the ownership of the asset and the benefits flowing from it. Home-grown solution When we came to look at the options within the context of Scots law, it was quickly apparent that the English models could not be adopted directly as they stood. As noted, the majority of these proceed on an ijara leasing basis, and in addition involve the lender taking a security over the lease in question.This is by definition impossible in the Scottish context, given on the one hand the effective prohibition on residential leases in excess of 20 years and on the other the restriction of standard securities to “long” leases exceeding this term. www.journalonline.co.uk
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