Yazd, Iran - April 22, 2017: A young man uses a smartphone while sitting on a chair in a tin shop.Photo: Grigorev Vladimir - iStockphoto

Five years after the business rush to Iran following the nuclear deal, multinationals providing telecom technologies to Iran must seriously step up their efforts to avoid causing or contributing to adverse human rights impacts, the Centre for Research on Multinational Corporations (SOMO), the International Federation for Human Rights (FIDH) and Justice for Iran argue in a joint discussion paper.

publication cover - Under a watchful eye

Under a watchful eye

Due diligence expectations of telecoms companies doing business with repressive regimes – the case of Italtel and Iran

Given the anticipated waning of the tensions between Iran and the international community and with the ongoing debate on the United States returning to the Iran nuclear deal under the Biden administration, it is important to learn lessons from the past now before Iran’s market reopens to international companies.

In the paper, SOMO, FIDH and Justice for Iran analysed the case of telecom giant Italtel, an Italy-based multinational that ran into trouble due to its business activities in Iran, as it was ill-prepared for the risks of becoming involved in the regime’s human rights abuses.

In April 2016, Italtel signed an agreement with the state-run Telecommunications Company of Iran (TCI), to provide it with telecom products and services. These included internet backbone technology carrying a high risk of adversely impacting human rights through state-imposed restrictions on the flow of information.

In the first-ever case related to Iran under the OECD Guidelines, FIDH, REDRESS, and Justice for Iran filed a joint complaint against Italtel, highlighting the tight grip of the Iranian authorities over TCI, and arguing that the Italian multinational had failed to identify the risks of contributing to severe negative human rights impacts. This led to Italtel reassessing its agreement and withdrawing some of the services it had previously offered to provide to TCI.

Like Italtel, many other European companies signed contracts and engaged in Iran’s economy in the 2015-2018 period without conducting due diligence or properly considering the human rights situation as a condition for doing business with the regime. While the Biden administration is currently considering different options to rejoin the 2015 nuclear deal that was abandoned by former President Trump in 2018, there is a risk of companies repeating the same mistakes.

“If tensions between Iran and the international community are once again eased and economic sanctions imposed on Iran lifted, the last thing we want to see is the same irresponsible behaviour that we witnessed in 2016 when foreign governments and multinationals turned a blind eye to widespread and well-documented violations of human rights and rushed to Iran to indulge in their commercial interests.” — Justice for Iran Co-Director Mohammad Nayyeri

The paper draws lessons and recommendations from the Italtel case to improve human rights due diligence by multinational ICT companies doing business with repressive and authoritarian regimes.

“Telecom and technology companies must recognize that ICT is increasingly vital to repressive states and used extensively, and often effectively, to perpetuate repression. Therefore, they must adopt a heightened level of scrutiny when considering doing business in any authoritarian context, and should be prepared to avoid engagement, or to disengage, if they assess that they would otherwise contribute to serious human rights abuses.” — Maddalena Neglia, head of FIDH’s globalisation and human rights desk

The paper also contains recommendations for  governments, the OECD, and the National Contact Points for the OECD Guidelines. They should push for binding legislation so due diligence expectations are no longer left to voluntary mechanisms that do not legally require companies to respect human rights.

“Given the growing momentum for mandatory due diligence — with legislative proposals already on the table in many countries — it is important that companies operating in or doing business with governments with a poor human rights record immediately start aligning their internal procedures with international standards on human rights due diligence. What can now lead to reputational risks, may in the near future have serious legal implications.” — Joseph Wilde-Ramsing, senior researcher at SOMO

This is the first of four papers on due diligence and doing business with repressive regimes like Iran.