As has already been noted, Myanmar’s military has invested significantly in strengthening and modernising its arms production as a means of reducing the impacts of current and potential future sanctions and arms embargoes. This does not mean, however, that the DDI is not reliant on external resources for this production; to the contrary, the DDI continues to import significant quantities of raw materials, parts and components, and end items, as well as machinery and technology to produce weapons at scale.
This research conducted by SAC-M has identified many companies and States that supply the DDI – directly or indirectly – with the products it needs for this production. In doing so, these companies and States enable continued weapon production by the military in Myanmar, and, consequently, also enable continued gross human rights violations by the military. In light of this, while it is clear that the military must be held accountable for its human rights violations, this report emphasises that concrete action must also be taken by States and companies to end the trade that enables the violations. Doing so is not only morally imperative, but also a requirement under international human rights law, as well as arms transfer agreements, dual-use goods regimes and other restrictive measures that currently apply in relation to Myanmar.
The State Duty to Protect
International human rights law places certain obligations on States to regulate the behaviour of businesses that operate in their territory or under their jurisdiction, and an increasing number of international human rights mechanisms have interpreted this State obligation to also apply in relation to businesses that have or may have adverse impacts on the human rights of people outside their territory.83 This is particularly relevant to States with businesses that have transferred materials, parts and components, and end-items as well as machinery and technology to the Myanmar military and the DDI, and to States from which businesses have relations with the Myanmar military and the DDI, directly or indirectly, through joint ventures and commercial partnerships. In addition to international human rights law, international humanitarian law regulates armed conflict,84 such as that currently occurring in Myanmar. Common Article 1 of the four Geneva Conventions places a standing obligation on States to ensure respect for the Conventions’ protections in all circumstances. In its authoritative commentary to Common Article 1, the International Committee of the Red Cross has established that meeting this obligation requires States to “refrain from transferring weapons if there is an expectation, based on facts or knowledge of past patterns, that the weapons would be used to violate the Conventions.”85 It has been credibly argued that, once a State knows that the receiving State systematically commits violations of humanitarian law with certain weapons, continuing assistance is necessarily given with a view to facilitating further violations.86
In relation to the international transfer of arms and associated parts and components, end- items, machinery and technology, several multilateral agreements currently also apply in relation to Myanmar:
- The Arms Trade Treaty. The Arms Trade Treaty regulates the international transfer of most conventional arms, the ammunition/munitions they fire and their parts and components. The Arms Trade Treaty establishes that a State party should abstain from authorising a transfer of the items covered by the Treaty if it has knowledge at the time of authorisation that the arms or items would be used in the commission of genocide, crimes against humanity, grave breaches of the Geneva Conventions, attacks directed against civilian objects or civilians protected as such, or other war crimes as defined by international agreements to which it is a party. If a transfer is not prohibited under Article 6 and if the transfer involves an export, the exporting State is required to conduct an export assessment in accordance with Article 7 which prohibits the transfer where there is an overriding risk that the arms or items will be used to commit or facilitate serious violations of human rights. The Treaty specifically addresses the risk of diversion – the process by which the items covered by the Treaty are delivered to an unauthorised end user or put to an unauthorised end-use – and it requires that States involved in the import, export, transit, or trans- shipment of arms (including components) must cooperate and exchange information with a view to mitigating this risk. If diversion is detected, the State parties concerned must take appropriate measures to address it.
- The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. The Wassenaar Arrangement is intended to reduce threats to regional and international security. It does so by, among other things, promoting the transparency of national export and control regimes on conventional arms and dual-use goods and technologies. The Arrangement establishes lists of items for which participating States – currently numbering 42 – should apply export controls. Similar to the Arms Trade Treaty, the export controls apply to a number of parts and components (such as, for example, fuses) and end-items (such as optical sights). In addition, the Arrangement’s export controls apply to listed machinery and technology that could be used to manufacture weapons and ammunition at scale, such as CNC machines with a specified number of simultaneous movements of the axes of the machines.
- Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 setting up a Union regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items (recast). The EU Dual-Use Goods Regulation is the key legislative instrument governing EU exports of dual-use items.87 It requires competent authorities in EU member states to consider if goods could be used for internal repression or other serious violations of human rights when deciding whether to grant a licence for the export of any goods that are listed in the Regulation’s Annex. This Annex includes a number of items that have been identified in use at Myanmar’s KaPaSa factories, including CNC machines. Beyond the EU’s Dual- Use Goods Regulation, which applies to all transfers outside of the Union including to Myanmar, the EU has also imposed additional ‘restrictive measures’ on Myanmar. These include, among other measures, an arms embargo, an embargo on equipment which might be used for internal repression, as well as targeted measures against senior military officers of the Myanmar armed forces88 and associated arms brokers.89
- Restrictive measures, including sanctions on specific individuals and entities. In addition to requirements and prohibitions under the Arms Trade Treaty, the Wassenaar Arrangement and the EU Dual-Use Goods Regulation, relevant restrictive measures have also been applied by individual UN Member States,90 including sanctions directly targeting the DDI in Myanmar91 and to companies brokering arms and equipment deals for the military.92
The Corporate Responsibility to Respect
A foundational principle of the United Nations’ Guiding Principles on Business and Human Rights – the most authoritative global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity – is that all business enterprises should respect human rights. In situations of armed conflict, enterprises should also respect the standards of international humanitarian law and, where they fail to do so, both individual personnel and the enterprise itself expose themselves to the risk of criminal and civil liability.93 The Guiding Principles apply to all business enterprises, both transnational and others, regardless of their size, sector, location, ownership and structure. Consequently, they apply to all companies identified in this report as supplying – directly or indirectly – the DDI with products used at the KaPaSa factories or auxiliary industries.
Under the UN Guiding Principles, meeting their responsibility to respect human rights and international humanitarian law standards requires companies to:
- adopt a public policy commitment in which they express their commitment to respect human
rights and that is clearly communicated both internally and externally; - exercise due diligence on their entire value chain (both upstream and downstream)94 to identify human rights risks and harms that they cause, contribute to, or are directly linked to by virtue of their business relationships (understood to include relationships with business partners, entities in their value chains, and any other non-State or State entities directly linked to their business operations, products or services), including in relation to the end-use of their products;
- take measures to prevent or mitigate risks of adverse human rights impacts that have been identified, including by using their leverage; and
- enable remediation for any human rights harm that they have caused or contributed to.95
Exporting to conflict-affected areas or areas with repressive regimes presents heightened risks of business involvement in serious human rights abuses.96 In consequence, exporters to Myanmar of the types of products that have been identified in use at KaPaSa factories face increased liability because:
- The risk of human rights harms arising from the misuse of products is exacerbated in challenging operational contexts such as those presented by conflict areas or under control of repressive regimes.
- Doing business in conflict-affected areas raises the risks of involvement in serious violations of international human rights or humanitarian law committed by State actors such as the military, the police and security forces.
- They are likely to be subject to special conditions, prohibitions or licensing requirements under domestic export control laws and regulations in light of the risky nature of the goods, products and services that they trade in.97 As has been outlined above, a number of export controls currently apply in relation to certain parts and components, end-items and machinery and technology that could be used for arms manufacturing.
Importantly, the corporate responsibility to respect human rights is independent of States’ abilities and/or willingness to fulfil their human rights obligations. In practical terms, this means that companies are always expected to apply their own due diligence in relation to the potential harmful end-use of their products and to seek to prevent or mitigate any harmful impacts associated with such end-use. In other words, where export controls apply, companies are not absolved of their responsibility to respect human rights by the mere fact that their home States have granted the necessary permits authorising exports.98 In addition, companies are expected to address risks of harmful end-use of their products through engagement with their business relationships, in particular business relationships that play a key role in the delivery of a given product (or a component of a product) to a market. In the KaPaSa value chain, some of the common business relationships of the companies identified in this report include dealers, distributors, franchisees and licensees. The fact that a company is not selling products directly to the DDI or is not itself present and/or active in Myanmar does not reduce its responsibility to address the risk that its products are put to harmful end-use through the actions or omissions of its business relationships.
In short, doing business in conflict-affected areas like Myanmar or trading in products with a potential harmful end-use requires companies to conduct enhanced due diligence, and this responsibility goes beyond simply applying for, and obtaining, official permits that may be needed for exporting to Myanmar. In the absence of such enhanced due diligence, companies and their personnel may face risk of civil or criminal liability.
Box 1. Addressing the Risk of Harmful End-Use Linked to Diversion99
Under the Arms Trade Treaty, the Wassenaar Arrangement, the EU Dual-Use Goods Regulation and national regulations on the export of dual-use goods items, particular care must be taken to ensure that exports are not diverted from their intended use or intended user. Nevertheless, instances of diversion are common and remain a key challenge to the effective implementation of these regimes. The risk of diversion poses important challenges for States authorising exports but also for exporting companies.
There are different ways in which States and companies can prevent and mitigate the risk of diversion. Exporting States, for example, should proactively avoid situations that could later limit their ability to meet their obligations, for example by binding themselves to an export contract in which possible responses to diversion are limited by the prospect of penalties or other liabilities. Adherence to end-use assurances should be a requirement for the fulfilment of contracts from the outset, both in relation to exporting companies and to recipients.
Taking all reasonable steps to prevent harmful end-use, including through diversion, associated with product promotion, deployment, contracting, sales/licensing and use, should be a central focus of companies’ due diligence processes. In terms of prevention and mitigation, there are many ways in which companies can address the risk of harmful end-use associated with diversion, including, for example, by clearly communicating that diversion will not be tolerated and reflecting such expectations as contractual obligations, and having the appropriate internal functions and processes in place to regularly monitor and respond to risks and detected instances of diversion.
The types of measures needed to prevent and/or mitigate the risk of diversion will invariably be linked to the nature of the products. In relation to the CNC machines needed to manufacture weapons at scale, for example, some licensing companies have reduced the risk of diversion by installing devices in their machine tools that will “hobble” the machines if they are moved from an agreed location/use. The intent is to thwart potential movement of machine tools to people, companies or countries that may put the machines to unintended military-manufacture use.100
Diversion can occur covertly, and there are well known limits to the ability of States and companies to detect and verify diversion. Nevertheless, where there is credible information to suggest that diversion has occurred, both exporting States and companies have a responsibility to respond. The most appropriate response will depend on the issues at hand in the given circumstances, but can range from States or companies using leverage over the actor or actors involved to prevent further harm and, where the use of leverage is unsuccessful, to halting the business relationship and any further transactions altogether. In all instances, States and companies are expected to take steps to ensure that victims of harm can seek and obtain effective remedy for harms suffered.
Footnotes:
83 Human Rights Committee, General Comment No. 36 (2018) on article 6 of the International Covenant on Civil and Political Rights, on the right to life, paragraph 22; E/C.12/GC/24, Committee on Economic, Social and Cultural Rights, General Comment No. 24 (2017) on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities, paragraphs 26 and 28. Available at: https://www.ohchr.org/sites/default/files/Documents/HRBodies/CCPR/GCArticle6/GCArticle6_EN.pdf (Accessed 10 January 2023).
84 For additional information on the application of international humanitarian law in Myanmar, see, A/HRC/39/CRP.2, paragraphs 60- 62. Available at: https://www.ohchr.org/sites/default/files/Documents/HRBodies/HRCouncil/FFM-Myanmar/A_HRC_39_CRP.2.pdf (Accessed 10 January 2023).
85 Jean-Marie Henckaerts, eds., Commentary on the First Geneva Convention: Convention (I) for the Amelioration of the Condition of the Wounded in Armies in the Field, International Committee of the Red Cross, 15 December 2016, paragraph 162. The Arms Trade Treaty references this obligation when it lists its principle of “Respecting and ensuring respect for international humanitarian law in accordance with, inter alia, the Geneva Conventions of 1949.”
86 Marco Sassoli, “State responsibility for violations of international humanitarian law,” International Review of the Red Cross, June 2002, Vol. 84 No 846, pg. 413. Available at: https://www.icrc.org/en/doc/assets/files/other/401_434_sassoli.pdf (Accessed 10 January 2023).
87 The 2021 recast replaced Regulation (EU) No 428/2009.
88 For an overview of current restrictive measures by the EU that apply in relation to Myanmar as of 8 November 2022, see https://www.sanctionsmap.eu/#/main/details/8/search=%7B%22value%22:%22%22,%22searchType%22:%7B%7D%7D.
89 On 8 November 2022, the EU sanctioned, among others, crony arms brokers, Dr Aung Moe Myint, Dr Naing Htut Aung and Tay Za. See Council Implementing Regulation (EU) 2022/2177 of 8 November 2022 implementing Regulation (EU) No 401/2013 concerning restrictive measures in view of the situation in Myanmar/Burma.
90 For a record of restrictive measures taken by States in relation to Myanmar since February 2021, see https://specialadvisorycouncil.org/cut-the-weapons/.
91 For example, sanctions on the DDI and its procurement department are currently applied by the US, Canada, Japan and the UK.
92 For example, Aung Moe Myint is targeted by sanctions imposed by the UK and Canada, and his business, Dynasty International Company Limited, is also sanctioned by the UK, while the Htoo Group of Companies and some of its key directors and shareholders have been sanctioned by the US, the UK and the EU for providing financial support and arms to the Myanmar military. Dr Naing Htut Aung, the managing director of International Gateways Group of Companies (IGG), is sanctioned by the US; IGG, through its subsidiary Gateways Hongkong Company Limited, was awarded contracts worth millions of US dollars to supply equipment including spare parts and upgrades for the air force’s fighter jets and other aircraft and weapons for warships to the Myanmar military. See “Exposed: companies brokering arms & equipment to Myanmar military,” Justice for Myanmar, 11 August 2022. Available at: https://www.justiceformyanmar.org/stories/exposed-companies-brokering-arms-equipment-to-myanmar-military (Accessed 10 January 2023).
93 Guiding Principle 12, commentary. While applying primarily to States, the International Committee of the Red Cross has also affirmed that humanitarian law standards also apply to companies in situations of armed conflict and impose obligations on managers and staff not to breach such standards.
94 Upstream refers to the aspect of the value chain that concerns the sourcing by a manufacturer of the goods needed to make products (or components of products). The downstream value chain refers to the part of the value chain concerned with the delivery of a product (or component of a product) to market, and ultimately to an end-user. A company’s position on a value chain is a relative concept. For example, a factory making components to be installed in weapons would be considered downstream of suppliers of raw materials but upstream of the firm that make the weapons. See Amnesty International, 18 November 2021, “JBC Off Track: Evading responsibility for human rights violations committed with JBC machines in the Occupied Palestinian Territories.” Available at: https://corporatejusticecoalition.org/wp-content/uploads/2021/12/JCB-Off-Track-Amnesty-International-report.pdf (Accessed 10 January 2023).
95 Guiding Principles Part II, the Corporate Responsibility to Respect Human Rights: Guiding Principles 11-24.
96 The following section draws heavily from Amnesty International, 18 November 2021, “JBC Off Track: Evading responsibility for human rights violations committed with JBC machines in the Occupied Palestinian Territories,” pgs. 30-39.
97 For example, products known to be prone or susceptible to misuse or which appear indispensable to the pursuit of certain human rights-abusing policies.
98 At present, several lawsuits and administrative proceedings have been initiated across Europe to challenge arms export permits on grounds of alleged human rights impacts or that seek to establish accountability of arms manufacturers and licensing authorities in criminal courts. For an overview of such proceedings see, for example, Schliemann, C., and Bryk, L., November 2019, “Arms Trade and Corporate Responsibility: Liability, Litigation and Legislative Reform.” Available at: https://library.fes.de/pdf-files/iez/15850.pdf (Accessed 10 January 2023).
99 For an overview of the risk of diversion and measures for exporting States to respond to this risk under the Arms Trade Treaty see Jaramillo, C., and Gallagher, K., December 2021, “The risk of diversion in the arms trade transfer cycle: 3 factors to consider.”
100 See, for example, American Machinist, 25 January 2008, “Mazak makes a Stand on Export Control Compliance,” available at: https://www.americanmachinist.com/archive/viewpoints/article/21895802/mazak-makes-a-stand-on-export-control-compliance (Accessed 16 January 2023).