Ottawa and Canadian mining companies are picking over a UN report by an independent panel of experts looking into the vicious four-year-old war in the Democratic Republic of Congo. By naming six Canadian companies in its report, released last week, the UN panel has put Canadian firms in the company of those linked to a plunder of the resource-rich country running into billions of dollars.

The report is scathing about what it calls the "elite networks" of government officials, army and rebel officers, businessmen, brokers and criminals, from the DRC, neighbouring countries and internationally, that are busy exploiting the country's natural wealth to finance the war and line pockets.

According to the panel, some Canadian companies are doing business with those "elite networks," arranging kickbacks and establishing joint ventures with dodgy middlemen to gain access to vast mineral deposits. The report indicates that these companies have dealings with networks that represent the business interests of the warlords in the region, from the DRC itself, Rwanda, Uganda and Zimbabwe. It's their association with those warlord networks that is getting otherwise law-abiding companies in trouble, regardless of whether their activities are technically legal or not.

Warlords are, of course, in the business of making war. Increasingly, they are also in the business of making vast amounts of money at making war. The report describes how, under the cover of the anarchy of war, stolen commodities -- diamonds, timber, gold and metals that go into high-tech components -- are laundered into legitimate and underregulated global markets. Some profits are used to buy weapons and other materials needed to sustain a conflict that has killed an estimated three million people through war, famine and disease.

The ability to move commodities and funds between illicit sources and legal markets is crucial to this vicious cycle of war and plunder. It's one way -- as a key link in the marketing chain -- in which legitimate companies are important to warlords. And it's one reason the UN is increasingly concerned about companies operating in these war zones.

There are other reasons for concern. War economies in almost every region of the globe have spawned hundreds of companies that would not exist in the absence of war and corruption. Some firms are fronts for the warlord networks. Others are simply willing to assume the higher risks of operating in war zones and find opportunities galore in the lack of regulation that accompanies war.

Some of these companies operate illegally, but many others are not technically in violation of any law, often simply because there aren't any, or at least none that are enforced. Yet these companies' actions are often in direct contradiction to UN sanctions or other efforts to promote security or peace. They are, in this sense, rogue companies.

The rogue-company phenomenon presents real dangers for Canadian companies. The increasing attention being paid to war economies by governments and advocacy groups means that all firms that operate in this way -- be they multinationals or local firms -- are at risk of being branded as rogue companies.

Companies aren't moral entities. They need rules to tell them what they cannot do. Yet, there is no law against investing in or helping to sustain war economies. Nor are there any internationally agreed upon definitions of corporate liability, or standards against which to measure company behaviour. The guidelines of the Organization for Economic Co-operation and Development (OECD) -- of which the panel's report says many companies operating in the DRC are in violation -- don't mention conflict, and only generally raise human rights.

The Security Council and member states of the UN -- with countries such as Canada, Norway, Britain and South Africa in the lead -- have just begun grappling with the issue of war economies. Regulation may be on the horizon.

But in the meantime, companies engaged in otherwise legitimate activities could unwittingly find themselves on the wrong side of international opinion, joining the rogue companies as targets for international action.
Mark Taylor is deputy managing director at the Fafo Institute for Applied International Studies in Oslo. He is the editor of Economies of Conflict, due out in 2003.

Ottawa and Canadian mining companies are picking over a UN report by an independent panel of experts looking into the vicious four-year-old war in the Democratic Republic of Congo. By naming six Canadian companies in its report, released last week, the UN panel has put Canadian firms in the company of those linked to a plunder of the resource-rich country running into billions of dollars.

The report is scathing about what it calls the "elite networks" of government officials, army and rebel officers, businessmen, brokers and criminals, from the DRC, neighbouring countries and internationally, that are busy exploiting the country's natural wealth to finance the war and line pockets.

According to the panel, some Canadian companies are doing business with those "elite networks," arranging kickbacks and establishing joint ventures with dodgy middlemen to gain access to vast mineral deposits. The report indicates that these companies have dealings with networks that represent the business interests of the warlords in the region, from the DRC itself, Rwanda, Uganda and Zimbabwe. It's their association with those warlord networks that is getting otherwise law-abiding companies in trouble, regardless of whether their activities are technically legal or not.

Warlords are, of course, in the business of making war. Increasingly, they are also in the business of making vast amounts of money at making war. The report describes how, under the cover of the anarchy of war, stolen commodities -- diamonds, timber, gold and metals that go into high-tech components -- are laundered into legitimate and underregulated global markets. Some profits are used to buy weapons and other materials needed to sustain a conflict that has killed an estimated three million people through war, famine and disease.

The ability to move commodities and funds between illicit sources and legal markets is crucial to this vicious cycle of war and plunder. It's one way -- as a key link in the marketing chain -- in which legitimate companies are important to warlords. And it's one reason the UN is increasingly concerned about companies operating in these war zones.

There are other reasons for concern. War economies in almost every region of the globe have spawned hundreds of companies that would not exist in the absence of war and corruption. Some firms are fronts for the warlord networks. Others are simply willing to assume the higher risks of operating in war zones and find opportunities galore in the lack of regulation that accompanies war.

Some of these companies operate illegally, but many others are not technically in violation of any law, often simply because there aren't any, or at least none that are enforced. Yet these companies' actions are often in direct contradiction to UN sanctions or other efforts to promote security or peace. They are, in this sense, rogue companies.

The rogue-company phenomenon presents real dangers for Canadian companies. The increasing attention being paid to war economies by governments and advocacy groups means that all firms that operate in this way -- be they multinationals or local firms -- are at risk of being branded as rogue companies.

Companies aren't moral entities. They need rules to tell them what they cannot do. Yet, there is no law against investing in or helping to sustain war economies. Nor are there any internationally agreed upon definitions of corporate liability, or standards against which to measure company behaviour. The guidelines of the Organization for Economic Co-operation and Development (OECD) -- of which the panel's report says many companies operating in the DRC are in violation -- don't mention conflict, and only generally raise human rights.

The Security Council and member states of the UN -- with countries such as Canada, Norway, Britain and South Africa in the lead -- have just begun grappling with the issue of war economies. Regulation may be on the horizon.

But in the meantime, companies engaged in otherwise legitimate activities could unwittingly find themselves on the wrong side of international opinion, joining the rogue companies as targets for international action.
Mark Taylor is deputy managing director at the Fafo Institute for Applied International Studies in Oslo. He is the editor of Economies of Conflict, due out in 2003.