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Mandate of the Special Representative of the Secretary- General (SRSG) on the Issue of Human Rights and Transnational Corporations and other Business Enterprises

CORPORATE LAW PROJECT JURISDICTION: FIRM: Armstrongs (Submission coordinated by Edward Nathan Sonnenbergs) DATE: December 2010

This survey is an independent submission to the SRSG’s Project. It is the sole work of Armstrongs and the SRSG takes no position on any views expressed or implied in this report.

More information about the Corporate Law Project is available at: http://www.business- humanrights.org/SpecialRepPortal/Home/CorporateLawTools . 2

A NOTE FROM THE UN SPECIAL REPRESENTATIVE ON BUSINESS AND HUMAN RIGHTS September 2010

This survey is an independent submission to a project on corporate law and human rights under my mandate as Special Representative of the UN Secretary-General on Business and Human Rights: the “Corporate Law Project”. I am delighted that nineteen leading corporate law firms from around the world have agreed to make submissions to this project, and thank them for their engagement. The willingness of so many firms to provide their services pro bono in order to expand the common knowledge base indicates that corporate law firms worldwide appreciate that human rights are relevant to their clients’ needs.

It is important at the outset to understand how this project fits into my wider work. I was appointed in 2005 by then UN Secretary-General Kofi Annan with a broad mandate to identify and clarify standards of corporate responsibility and accountability regarding human rights, including the role of states. In June 2008, after extensive global consultation with business, governments and civil society, I proposed a policy framework for managing business and human rights challenges to the United Nations Human Rights Council (Council). The Framework of “Protect, Respect and Remedy” rests on three differentiated yet complementary pillars: the state duty to protect against human rights abuses by third parties, including business, through appropriate policies, regulation, and adjudication; the corporate responsibility to respect human rights , which in essence means to act with due diligence to avoid infringing on the rights of others; and greater access for victims to effective remedy , judicial and non- judicial. You can read more about the Framework in my 2008, 2009 and 2010 reports to the Council, available at my website: http://www.business-humanrights.org/SpecialRepPortal/Home .

The Council unanimously welcomed what is now commonly referred to as the U.N. Framework and extended my mandate by another three years, tasking me with “operationalizing” the Framework—that is, to provide “practical recommendations” and “concrete guidance” to states, businesses and others on the Framework’s implementation. There has already been considerable uptake of the U.N. Framework by all relevant stakeholders. It has also enjoyed unanimous backing in the Council; strong endorsements by international business associations and individual companies; and positive statements from civil society.

A key aspect of the first pillar, the state duty to protect , is that states should foster corporate cultures respectful of rights both at home and abroad, through all appropriate avenues. In particular, I have been exploring the opportunities and challenges that corporate and securities law can provide in this regard. Corporate law directly shapes what companies do and how they do it. Yet its implications for human rights remain poorly understood. The two have often been viewed as distinct legal and policy spheres, populated by different communities of practice.

The Corporate Law Project will allow me to explore this area further by gaining knowledge from over 40 jurisdictions as to how national laws and policies dealing with incorporation and listing; directors’ duties; reporting; stakeholder engagement; and corporate governance more generally currently require, facilitate or discourage companies from respecting human rights. I am interested not only in what laws currently exist, but also how corporate regulators and courts apply the law to require or facilitate consideration by companies of their human rights impacts and preventative or remedial action where appropriate.

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The project thus formally comprises part of my work on the state duty to protect . It will assist me to understand whether and how national corporate law principles and practices currently encourage companies to foster corporate cultures respectful of human rights. I will in turn consider what, if any, policy recommendations to make to states in this area, following consultation with all relevant stakeholders. However it is just one element of my work on the state duty to protect, which also looks at other areas of the law and national policies which might help states to encourage companies to respect human rights.

The project will also support my work on the corporate responsibility to respect and access to effective remedy. In relation to the responsibility to respect, I have explained that in addition to compliance with national laws, the baseline responsibility of companies is to respect human rights. To discharge the responsibility, I have recommended that companies conduct ongoing human rights due diligence whereby they become aware of, prevent, and mitigate adverse human rights impacts. The responsibility exists even where national laws are absent or not enforced because respecting rights is the very foundation of a company’s social license to operate. It is recognized as such by virtually every voluntary business initiative, including the UN Global Compact, and soft law instruments such as the International Labour Organization Tripartite Declaration and the OECD Guidelines on Multinational Enterprises. Nevertheless, an understanding of national laws, including corporate law, remains vital to ensure companies understand and comply with their national legal obligations. Moreover, as my 2010 report to the Council highlights, companies may face non-compliance with corporate and securities laws where they fail to adequately assess and aggregate stakeholder-related risks, including human rights risks, and may thus be less likely to effectively disclose and mitigate them, as may be required.

The Corporate Law Project’s website is http://www.business- humanrights.org/SpecialRepPortal/Home/CorporateLawTools . There you will find the original press release for this project; the research template the firms have agreed to follow; summary reports from two consultations held to date on the project; an over-arching trends paper bringing together the main themes from the firms’ surveys; and all completed firm surveys.

My thanks again to all stakeholders who have contributed to this project.

John G. Ruggie Special Representative of the UN Secretary-General on Business and Human Rights 4

SETTING THE LEGAL LANDSCAPE :

1. Briefly explain the broader legal landscape regarding business and human rights.

1.1. According to the latest treaty register, the treaties Botswana has signed onto and relating to human rights and have been incorporated into domestic law are as follows:

UN Charter 1.1.1. Declaration of Acceptance of the obligations contained in the Charter of the United Nations: Admission of States membership in the United Nations in accordance with Article 4 of the Charter. Resolution 2136 (XXI) Adopted 17 October 1966 .

African Charter Human and Peoples Rights 1.1.2. African Charter on Human and Peoples Rights. Adopted by the 18 th Session of the Assembly of Heads of State and Government in June 1981. Ratified 17 July 1986 .

1.1.3. Protocol to the African Charter on Human and Peoples Rights on the Establishment of an African Court on Human and Peoples’ Rights: Adopted at Ouagadougou by the 34 th Ordinary Session of the National Assembly of the Heads of State and Government in June 1998. Signed 9 June 1998.

Children’s Rights 1.1.4. Convention of the Rights of the Child. Adopted by the General Assembly of the United Nations on 20 November 1989. Accession 14 March 1995; Entered into Force on 13 April 1995.

1.1.5. African Charter on the Rights and Welfare of the Child. Ratified 10 July 2001 .

1.1.6. Optional Protocol to the Convention on The Rights of the Child on the Sale of Children, Child Prostitution and Child Pornography. Accession 24 September 2003.

1.1.7. Optional Protocol to the Convention on The Rights of the Child on the Involvement of Children in Armed Conflict. Ratified 4 October 2004.

The above treaties relating to children’s rights have been incorporated into domestic law by the enactment of the Children’s Act of 2009 which was passed by on 16 June 2009 but is not yet in operation.

Civil and Political Rights 1.1.8. International Covenant on Civil and Political Rights. Ratified 8 September 2000 with reservations made upon signature and confirmed upon ratification in respect of Articles 7 (freedom from torture or to cruel, inhuman or degrading treatment or punishment including freedom from medical or scientific experimentation) and 12 paragraph 3 (restriction of right to liberty of movement and freedom of choice of residence and freedom to leave any country, including his own by law to protect national security, public order, public health or morals or the rights and freedoms of 5

others) to the extent that they are compatible with sections 7 and 14 (protection of freedom of movement) of the Constitution of Botswana respectively.

Racial Discrimination 1.1.9. International Convention on the Elimination of al Forms of Racial Discrimination. Accession 20 February 1974.

Torture 1.1.10. Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. Ratified 8 September 2000 with reservations made upon signature and confirmed upon ratification in respect of Article 1 of the Convention to the extent that it is compatible with section 7 of the Constitution of Botswana.

Human Trafficking in Persons 1.1.11. Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children, supplementing the United Nations Convention against Transnational Organised Crime. Ratified 29 August 2002 .

1.1.12. Optional Protocol to the Convention on the Rights of the Child on the Sale of Children, Child Prostitution and Child Pornography. Accession 24 September 2003.

Women 1.1.13. Convention on the Elimination of All Forms of Discrimination against Women. Accession 13 August 1996 , entered into force 2 September 1996 .

1.1.14. Optional Protocol to the Convention on the Elimination of All Forms of Discrimination against Women 1999. Accession 21 February 2007.

Botswana is not a signatory to the International Covenant on Economic, Social and Cultural Rights1966 (“ICESCR”). Further, there is no constitutional right to environmental health. However, there are pieces of legislation such as the Waste Management Act and the Environmental Impact Act which seek to promote a healthy life and environment.

1.2 With regard to Business law and human rights, these are two distinct subjects in Botswana.

1.3 Business law, is usually regulated in terms of various pieces of legislation such as the Companies Act and various other statutes intended to regulate various types of businesses such as the Non-Banking Financial Institutions Regulatory Authority, i.e., for the licensing of all financial institutions except banks.

1.4 Human rights are usually protected in terms of different statutes such as the Abolition of Marital Power Act, which seeks to abolish the common law position whereby a husband married in community of property has marital power over the wife. There are however, overlaps such as for instance in the Abolition of Marital Power Act which has provisions, designed to ensure equality between men and women, when it comes to business transactions.

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1.5 However, generally human rights and business are treated as separate distinct subjects in Botswana.

REGULATORY FRAMEWORK :

2. To what legal tradition does the jurisdiction belong, i.e., civil/ common law/ mixed ?

The Botswana legal tradition is based on the Roman Dutch Law system, which is the same as the common law of .

3. Are corporate/ securities laws regulated federally, provincially or both ?

Corporate/ securities law, are regulated by statute, which are national laws. Botswana is a Republic and not a federal state.

4. Who are the government corporate/ securities regulators and what are their respective powers ?

4.1. Every piece of legislation has a Ministry and/or department which is conferred with the duty of enforcing the mandate of the Act.

4.2. For instance, the Ministry of Trade and Industry is entrusted with regulating trade issues in Botswana under which are the Registrar of Companies; the Department of Trade and consumer Affairs; the Department of Industrial Affairs; and Department of Cooperative Development. The Companies Act is administered by the Registrar of Companies who is appointed by the Minister of Trade and is mandated with overseeing company registration in Botswana.

4.3. Current corporate/ securities regulators, in respect of listed securities however are the Botswana Stock Exchange. In respect of all other securities the Non-Banking Financial Institutions Regulatory Authority has been set up to act as Regulator to all securities dealers. These two regulators govern their respective sector in accordance to their constitutive or enabling Acts, these being the Botswana Stock Exchange Act and the Non-Banking Financial Institutions Regulatory Authority Act.

5. Does your jurisdiction have a stock exchange(s)?

Yes, the Botswana Stock Exchange (“BSE”).

INCORPORATION AND LISTING :

6. Do the concepts of “limited liability” and “separate legal personality” exist ?

6.1. The concepts of “limited liability” and “separate legal personality” exist in respect of companies which are incorporated in terms of the Companies Act 2003.

6.2. Pursuant to section 481 of the Act, these two concepts are limited in the course of a wind-up, judicial management of a company or if it appears that any business of a company was or is being carried on recklessly or with intent to defraud. 7

7. Did incorporation or listing historically, or does it today, require any recognition of a duty to society, including respect of human rights?

7.1. Incorporation or listing historically does not require any recognition of a duty to society and respect of any human rights.

7.2. However, in 2002 the Directors Institute of Botswana (DIoB) was officially launched as an initiative by the private sector, government and parastatals to promote the ideals of world class corporate governance in all companies and in particular by adopting the standards as pronounced by Cadbury and the King Code of Corporate Governance.

8. Do any stock exchanges have a responsible investment index, and is participation voluntary? (See e.g. the Johannesburg Stock Exchange’s Socially Responsible Investment Index).

8.1. The BSE does not have a responsible investment index.

8.2. The BSE Rules have provisions in terms of what listed companies have to indicate to show their compliance with any of the codes of corporate governance, i.e., King Code of Corporate Governance.

8.3. The King Code of Corporate Governance of South Africa (the “King Code”) enjoins companies to engage in corporate social responsibility in respect of its operations.

8.4. The King Code has a provision on corporate social responsibility and each BSE listed company must state in its annual report, its compliance with same. However, this is not a legal requirement of the Stock Exchange Rule, and is merely a contractual obligation.

8.5. This notwithstanding, corporate government initiatives in Botswana are being championed through the DIoB which has been affiliated, as a member, to the Institute of Director in Southern Africa (IoDSA) since early 2001.

8.6. The DIoB’s objectives were developed with the King Code in mind and include inter alia:

8.6.1. Encouraging sound corporate governance and to promote business ethics and best practices;

8.6.2. Promote the principles and the practice of responsible business leadership as defined in the Company publications and to keep members well informed of the economic and regulatory issues affecting business by also introducing course programmes and workshops to improve the professional standards of directors.

9. To whom are directors’ duties generally owed (i.e. to the company, non-shareholders etc…)?

9.1. The directors owe duties to the company and not to shareholders.

9.2. The Companies Act defines a “company” in terms its form of registration and its purported mandate and constitution. 8

10. Are there duties to avoid legal risk and damage to the company’s reputation? If so, are they duties in their own right or are they incorporated into other duties?

10.1. Section 130 of the Companies Act imposes a duty on the director(s) to act in good faith and in the best interest of the company for the respective purposes of which such powers are conferred. These include avoiding legal risk and damage to a company’s reputation, and the exercise of due care and skill in ensuring that the company does not agree to incurring unnecessary obligations which the company will not be able to perform or that prove to be detrimental to the company.

10.2. Similarly, in certain circumstances civil/criminal liability is imposed on the director(s) for breach of such duties.

11. More generally, are directors required or permitted to consider the company’s impacts or non-shareholders, including human rights impacts on the individuals and communities affected by the company’s operations? Is the answer the same where the impacts occur outside the jurisdiction? Can or must directors consider such impacts by subsidiaries, suppliers and other business partners, whether occurring inside or outside the jurisdiction? (See e.g. Sec. 172 UK )

11.1. There is nothing in the Companies Act that requires directors to consider the company’s impact on non-shareholders including human rights impacts on individuals and communities affected by the company’s operations.

11.2. As an absolute requirement conferred, a director must always act in the best interest of the company. They are therefore permitted to consider the company’s impact on the shareholder and non-shareholders to the extent that it is beneficial for the company.

11.3. There is in certain circumstances need for shareholder enlightenment on certain decisions affecting them as per the Companies Act in respect of the common law principle.

11.4. With regard to subsidiaries, a director of a company that is a subsidiary (wholly /partly) may when exercising powers of a director, if expressly or impliedly permitted to do so by the constitution of the company or prior agreement with the shareholders act in a manner believed to be in the best interest of the company.

12. If directors are required or permitted to consider impacts on non-shareholders to what extent do they have discretion in determining how to do so?

The director’s discretion for considering the company’s impact is centered on the interest of the company be it on shareholders. The Act is not specific on how much of that discretion they have and simply state that it should be for the interest of the company.

13. What are the legal consequences for failing to fulfill any duties described above; and who may take action to initiate them? What defenses are available?

13.1. A director, who fails to fulfill his duties as a director, is liable to the shareholders for actions for specific performance or damages. Such action may also be brought by shareholders or his/her fellow directors on behalf of the company. 9

13.2. There are no defenses to failure to fulfill such duties. 14. Are there any other directors’ duties which might encourage a corporate culture respectful of hum rights?

There are no specific duties which might encourage a corporate culture respectful of human rights.

15. For all the above, does the law provide guidance about the role of supervisory boards in cases of two tier board structures, as well as that of senior management?

15.1. The law does not provide adequate guidelines on the role of supervisory board in case of two tier board structures as well as that of senior management.

15.2. The director is defined under section 128 of the Companies Act essentially as an officer of the company which could include senior managers.

15.3. There is no minimum number of directors for a specific company set by the Companies Act. However, the Constitution of a particular company can specify the minimum number of directors.

REPORTING

16. Are companies required or permitted to disclose the impacts of their operations (including human rights impacts) on non-shareholders, as well as any action taken or intended to address those impacts, whether as part of financial reporting obligations or a separate reporting regime ?

16.1. Companies are neither expressly required nor permitted to disclose the impacts of their operations on non-shareholders or any action taken or intended to address these impacts as part of financial reporting or as a separate reporting regime. However, mining companies for instance, are required in terms of mining legislation, from time to time, to compile returns, regarding their environmental obligations, and how they affect communities who are non-shareholders.

16.2. The Companies Act specifically provides for non-disclosure of any confidential information received therefrom or on behalf of the company except for such information stated under the section 140 which includes inter alia:

16.2.1. Such information which is for the purposes of the company;

16.2.2. Is required by law;

16.2.3. Authorized by the Board;

16.2.4. Or any other circumstances authorized by the constitution or approved by the company.

This is done to protect the company’s interests or trade secrets from competing companies and from human rights impacts. 10

17. Do reporting obligations extend to such impacts or actions outside the jurisdiction; to the impacts or actions of subsidiaries, suppliers and other business partners, whether occurring inside or outside the jurisdiction?

17.1. The Companies Act provides that the annual financial statements of a company must include an auditors report. The auditor should report to the members of the company, the result of the operations of a company and its subsidiaries.

17.2. If the operations of a company are outside Botswana then the reporting obligations of the company would extent to such impacts.

17.3. The Companies Act provides that a holding company is required to submit group annual financial statements in addition to its own financial statements at the annual general meeting. Such reporting obligations relate only to the financial statements of the companies.

17.4. Botswana recognized the King II Report on Corporate Governance of which the adherence to it is voluntary. The King II Report contemplates appointment of an audit committee of the company but not at the subsidiary level.

18. Who must verify reports; who can access reports; and what are the legal consequences?

18.1. The directors of the company in terms of the Companies Act have an obligation to prepare the annual statements of the company and sending the financial statements to shareholders.

18.2. The directors bear the legal consequences of failing to report or the misrepresentation of the reports.

19. Are there any restrictions on circulating shareholder proposals which deal with impacts on non-shareholders, including human rights impacts?

There are no restrictions on circulating shareholder proposals or to deal with impacts on non-shareholders including human rights impact. Any shareholder is entitled to submit a shareholder proposal to directors for discussion at general meetings in respect of any aspect which affects the company.

20. Are institutional investors, including pension funds, required or permitted to consider such impacts in their investment decisions?

Institutional investors including pension funds are not required to consider such impacts in their investment decision. Those are internal requirements, which they make at their sole discretion imposed.

21. Can non-shareholders address companies’ annual general meetings?

Non-shareholders cannot address companies at annual general meetings, as of right.

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OTHER ISSUES OF CORPORATE GOVERNANCE :

22. Are there any other laws, policies, codes or guidelines related to corporate governance that might encourage companies to develop a corporate culture respectful of human rights, including through human rights due diligence process?

In our view, the most relevant guidelines in this regard are the BSE Listing Requirements for listed companies, which aim to accord with the King Code. As noted above, the King Code of Corporate Governance of South Africa enjoins a company to engage in corporate social responsibility in respect of its operations.

23. Are there any laws requiring representation of particular constituencies (i.e. employees, representatives of affected communities) on company boards ?

There are no laws requiring representation of particular constituencies on company boards.

24. Are there any laws requiring gender, racial/ethnic representation; or non- discrimination generally, on company boards?

There are no laws requiring gender, racial/ ethnic representation or non-discrimination generally, on company boards.