Legal Remedies for the Resource Curse

This report reviews some of the main legal instruments used to date to combat natural resource corruption—as well as new, untested legal remedies that appear promising. Focusing on resource spoliation in Africa, it provides case studies to demonstrate what has and has not worked. The report treats the "home countries" of resource extraction companies separately from the "host countries" where they operate. It looks at both criminal and civil means of redress. Although corruption in transnational resource extraction is generally subject to inadequate legal safeguards, the report identifies opportunities for civil society action. To date, public interest lawyers have focused primarily on human rights violations and environmental damage associated with the extractive industries. Legal responses to corrupt practice itself remain relatively rare, despite the fact that spoliation can occur independently of human rights or environmental abuse, and often underlies these broader problems where they occur. The establishment of a legal environment that renders the theft of public assets, bribery, and money laundering impossible, or at least unprofitable, would be a significant step toward ending resource spoliation, and diminishing the human rights and environmental violations that accompany it. The principal agents of spoliation, as the term is used here, are public officials in natural resource-rich “host” countries, multinational corporations in the extractive industries, and banks. The latter two generally operate out of the world’s largest economies (“home countries”), and are often members of the OECD (Organization for Economic Cooperation and Development). It is true that large-scale natural resource extraction operations utilize very different refining and delivery-to-market processes, and extraction operations occur in vastly different geographical and political environments. Nevertheless, large-scale natural resource extraction deals are often structured very similarly across industries (from oil to precious metals), regions, and political circumstances. For example, they inevitably require huge capital investments, often from large multinational corporations. These corporations need sophisticated multinational banks to manage their capital investments through financial instruments such as letters of credit and multitranche financing, and to receive and reliably retain the huge revenues. Such operations cannot be managed by local banks in poor countries.