Editor's note: Sara Martinetto is a research intern at the T.M.C. Asser Institute. She has recently completed her LLM in Public International Law at the University of Amsterdam. She holds interests in Migration Law, Criminal Law, Human Rights and European Law, with a special focus on their transnational dimension.

More than 11000 deaths and 25000 hospitalisations: the numbers divulged by the prosecution expert report assessing the human consequence of the operation of Ilva industries in the Italian city of Taranto are staggering. The environmental disaster caused by the plant brought the whole area to its knees and, in spite of all the efforts made, is still on-going. This is the story of a never-ending conflict. A conflict between different rights, which need to be balanced; between public authorities, who bear responsibility for ensuring and protecting those rights; between different normative levels and powers, given the numerous infringement proceedings opened by the EU Commission and the most recent claims lodged to the European Court of Human Rights (ECtHR). In the following sections I will try to shed some light on the main legal aspects of this tragic saga. For clarity, this article is divided in two posts: the first deals with the national level, while the second focuses on the supranational dimension of the case.

Factual and Legal Background

Ilva steel production has always been one of the cornerstones of Italy’s economy. The Taranto factory is the biggest steel plant in Europe and, in 2010, it counted more than 12.000 employees. It was a state-owned enterprise until 1995, when it was privatised and bought by the Riva family. It also acquired its liabilities: the negative impact of the plant on the environment had been, at the time, already acknowledged by the Italian Government. Indeed, the government had already conducted several investigations showing the existence of extensive air and water pollution, which required intervention on the sewage treatment plants. In particular, the high concentration of Dioxin was deemed to be worrisome, and extremely harmful for human health. In 1990, the Council of Ministers issued a Declaration pursuant to law 349 of 8 July 1986, stating that the Taranto area was “at risk of an environmental crisis”. Theoretically, this would have led to the drafting of a depollution plan; however, no authority meaningfully acted upon it, and the declaration was renewed in 1997. These documents have been incorporated in 1998 in a Presidential Decree which established the allocation of public and private funding for the clean-up for the plant.

In the meantime, an increasing environmental awareness led to the adoption – from the 90s onwards – of several legal instruments at the international, European and national level. Among others, one can recall the Rio Declaration on Environment and Development of 1992, Kyoto Protocol of 1997, the Aarhus Protocol and the Aarhus Convention of 1998. Particularly, the latter triggered a proliferation of European legislative action. Among the EU measures Council Directive 96/61/EC is particularly important.^[1] Also known as the Integrated Pollution Prevention and Control (IPPC) Directive, it obliged public authorities to issue an authorisation for all the activities presenting an environmental risk. The release of such a permit is conditional on whether BATs (Best Available Techniques) are applied. In Italy, the Directive has been implemented only in 2005, by mean of a legislative decree; the permit released by the government pursuant to this act is known as AIA (‘integrated environmental authorization’). 

The drafting of this new body of legislation resulted in several reforms in Italian law, such as the adoption of the Environmental Code in 2006.  However, the domestic implementation of such instruments is lagging, and characterised by delays and misinterpretations. The inadequacy of the legal framework in place will appear clearly in the ensuing sections, which give an account of the many extraordinary measures taken in this case. It will be shown how a flawed normative framework, coupled with the Italian government’s resolution to keep the plant open and its consequent undermining of the measures taken by the judiciary, have allowed the situation to deteriorate for decades without ever coming close to a solution.  

The Regional Authorities

The public authorities of the Puglia Region have played a prominent role in the Ilva case. In particular, at the end of the 90s – beginning of 2000s, the Puglia regional authorities were invested by the government with special powers to tackle the environmental crisis. Thereby, they concluded several Memoranda of Understandings with the company, aimed at giving it the means to depollute the area and to start a clean production. These agreements do not have per se legal value, but they provide for a set of programmatic guidelines aimed at reducing polluting emissions. Notwithstanding the multiple rehabilitation plans drafted, the deadlines and prescriptions included in these instruments have not been respected, making these guidelines nothing more than dead letter.

In 2008, the Puglia Council adopted Regional Law 44, also called Anti-Dioxin Law, in an attempt to implement Council Decision 2004/259/EC.^[2] However, the Government strongly opposed the timeframe indicated in the Law for depollution, and it ultimately managed to extend the deadline to 2010.^[3] On 24 July 2012, the Region adopted a new Law to patch the situation in the Taranto area.^[4] However, the tensions between branches of the State were already simmering. The judiciary wanted to stop production in order to prevent the continuation of a suspected environmental crime. While, the government was instead deeply concerned with the detrimental effects on the economy and on employment resulting from shutting down the plant.

The Italian court cases

The main legal proceeding on the Ilva case started in 2010, and was dubbed by the media as “Ambiente svenduto”[5] to stress the continuous subordination of environmental considerations in favour of business goals. The peculiar aspect of this case lies both on the number of indicted persons, and on the charges pressed against them. Albeit some initial suspects have benefitted from expedite proceedings, the indictment still includes 44 persons (one legal person and 43 natural persons). The charges do not only cover environmental crimes and crimes against public safety, but the Prosecution made its case based on the existence of an extensive network of corruption and abuses for the benefits of the indicted companies. Indicted individuals range from lawyers, to experts, to public officials, who have allegedly worked to keep the plant operational, thereby putting their profits over the health of the local population. 

Moreover, Italian judicial authorities have initiated a series of other (smaller) proceedings involving the managing board of Ilva, both prior and after the initiation of this trial. For example, in 2005, Emilio Riva (the main owner of the plant) and Luigi Capogrosso (managing director) were condemned for the emission of dangerous substances.^[6] This wrongdoing, provided for in art. 674 Italian Penal Code, is considered a misdemeanour.

'Ambiente svenduto'

In 2010, the Taranto Prosecutor’s Office opened an investigation on the alleged environmental damages caused by Ilva. The pre-trial phase saw the submission as evidence of two extensive expert reports (available here and here), documenting the high level of harmful emissions coming from the plant, and their correlation with the health hazards experienced by the local population. In particular, the reports show the appalling incidence of cancers, cardiovascular and respiratory diseases among Taranto citizens. 

On 25^th July 2012, Taranto’s GIP (judge for preliminary investigations) issued a provisory order requesting the seizure of six sectors of the plant, due to the suspected environmental damage discovered. The seizure was taken as a precautionary measure and had the effect of suspending the activities carried out in those sectors. The measure was then confirmed by the Tribunale del Riesame (Review Tribunal for Precautionary Measures), which held that the installations could be used only for the purpose of facilitating the clean-up (see excerpts here). A few months later, the judge issued a new seizure on some goods produced by Ilva, since they were considered the result of illicit activity of the company. These judicial orders gave rise to conflicted opinions in the public, the company, and other political institutions. Indeed, the company was not the only actor to strongly oppose the measures: workers have been deeply torn by the issue, faced with the evidence of extensive pollution on one hand, and the fear of losing their jobs on the other. For its part, the Government took a set of measures, which will be discussed below, basically aimed at limiting the effects of such judicial acts, and at keeping the plant open. These seizure orders became a core element of contention, and made their way up to the Constitutional Court. Other seizures were upheld by lower courts, but subsequently overruled by the Corte di Cassazione (highest Italian court).^[7] Thus, the Ilva plant stayed up and running, notwithstanding the damning evidence before the judges. 

Beside the controversies connected to precautionary measures, the “Ambiente svenduto” proceeding encountered several other hindrances. After the closure of the pre-trial phase, the file was passed on to the GUP (preliminary hearing judge). The Corte di Cassazione was seized again, and rejected the request to transfer the proceeding to another city, due to the intense pressure experienced in Taranto. Moreover, once the trial phase had started, the case was referred back to the GUP, due a procedural error. The trial phase has at the time of writing finally started. Nonetheless, the road to justice remains extremely lengthy and narrow. Victims have been waiting for a final judgement – and just in first instance – for seven years now.

The role of the Italian government before Opinion 85/2013

As mentioned above, the Italian government disagreed with the precautionary measures of the GIP, claiming that the judiciary was intervening in the definition of Italian industrial policy. Therefore, the Ministers of Environment, of Infrastructure, of Economic Development, together with the Heads of the Region, Province and the Mayor of Taranto signed a Memorandum of Understanding the day after the first order was issued. The idea was to find a compromise to proceed with the remediation of the site while safeguarding its employment level. Moreover, a couple of weeks later, the Government issued a Decree law, devolving funds for clean-up operations of the area.^[8] Furthermore, on 26^th October, the Ministry of Environment approved the new AIA, which would have practically allowed the Ilva to resume production.

The tension with the judiciary got further inflamed when the government issued the infamous “Rescuing Ilva” Decree, which was then converted into law 231/2012. Among other contentions raised by this act,^[9] the content of the decree appeared to be openly against the seizure disposed by the Court. Its art. 1 provides that the plant could stay open and productive for 36 months, abiding to the prescriptions of the AIA, and in spite of the measures ordered by the courts. It thus circumvented the prohibition to use the installations, and assigned the management of the plant back to its owner. Albeit a seizure order does not hold the value of res judicata, the Decree Law possibly jeopardised legal certainty, which is of the upmost importance when criminal law measures are involved.^[10] This led the Taranto Office of the Prosecutor, the GIP, and the Tribunale del Riesame to file a complaint to the Constitutional Court, which ruled on the matter in Opinion 85/2013. 

The Italian Constitutional Court and the Ilva case: Opinion 85/2013

The Constitutional Court was seized to rule on two separate issues: on one side, the Prosecutor alleged a conflict of attribution between State branches, on the other, the courts challenged the conformity of the Decree Law (and of the law which converted it) with the Italian Constitution. Though it declared inadmissible the Prosecutor’s claims, the Court did rule on constitutionality. The claims brought by the lower courts are complex and intertwined.^[11] For sake of clarity, they can be summarized in two main questions: did the government strike a reasonable balance between the right to health and safe environment and the right to work? Moreover, did the government act within its constitutional powers or did it unduly interfere with the competence of the judiciary?^[12]

In Opinion 85/2013, the Constitutional Court held that the Decree was in compliance with the Constitution, and that the balance it struck between different rights was not manifestly unreasonable. In particular, the Court stated that no right in the Constitution can automatically prevail on all others, and the same holds true for the right to a healthy environment (art. 32 Italian Constitution). The power to balance different rights is attributed to the legislative and administrative powers (§9). Thus, the AIA should be presumed reasonable,^[13] since it adopts measures with regard to a specific situation, within the margin of discretion constitutionally given to the administrative power (§10.3). The Decree merely recalls the AIA and requires its compliance, even in situations already covered by on-going judicial proceedings. 

In practice, the consequences of this ruling by the Constitutional Court were twofold. The government has, since then, continuously issued decrees in order to tackle the Ilva problem; Ilva was able to remain open and to continue production.

The role of the Italian government after Opinion 85/2013

After the Constitutional Court ruling, the government both renewed the AIA several times, and issued another series of Decree Law, aimed at saving and rehabilitating the plant. Among others, two interventions are worth mentioning. First, Decree Law 1/2015, which placed Ilva in temporary receivership. Its art. 2(6) provided, inter alia, functional immunity from criminal proceedings of the receiver in charge, since his duty is to implement the BAT prescribed in the new AIA. Secondly, Decree Law 92/2015 followed a new seizure decree by the GIP issued in the aftermath of a fatal incident in the plant. Promptly, its art. 3 extended the authorization to continue production “even if seizure measures have been issued with regard to industrial accidents”, subject to the creation of a depollution  plan within 30 days. This norm applies also to on-going seizures and, hence, to Ilva.^[14] Notwithstanding these efforts – and in spite of the 2015 reform of the penal code, instituting environmental crimes – there is extensive evidence that Ilva has not stopped polluting, and that the AIAs were not always respected.

All in all, the analysis shows the inability of the Italian State to significantly impact on the situation. First of all, the government was not capable of delivering long-standing solutions which would have allowed retaining employment in the area without putting the population at risk. Secondly, the conflict between judicial and legislative powers, which emerged with the issuing of precautionary measures, prevented them to jointly work toward the same goal. Thirdly, all this factors concurred in lengthening both the administrative and judicial proceedings, hindering the efforts for quick and effective results. As a result, no justice has been delivered, and Taranto remains deeply at risk. In addition to the employment challenges Ilva workers have to face, and the health threats affecting the population, the environmental damages caused by Ilva had extremely negative effects on other economic sectors, such as agriculture, fisheries and tourism.[15]  The second part of this post will turn to the (positive?) role of supranational actors in the Ilva case, assessing whether they could contribute to a solution out of reach for the Italian institutions. 

[1] The content was later codified in Directive 2008/1/EC of 15 January 2008, and it has now been included in Directive 2010/75/EU of 24 November 2010.

[2] The Decision implemented the Aarhus Protocol in EU law

[3] G. Caforio, L’Ilva Di Taranto Tra Interessi Industriali E Politiche Ambientali, Thesis, University of Perugia, 2012, 65

[4] It established a new depollution plan and coordinated several Government agencies for the appraisal of the epidemiological effects of the emissions.

[5] Namely, “Sold-off environment”

[6] Cass. Pen., sez. 3, n. 38936/2005

[7] Cass. Sez. III, 27427 of 20 June 2013; Cass., sez. VI, 3635 of 21 January 2014

[8] A Decree law is an act issued by the Government, which has the same legal stand as a law approved by Parliament. Pursuant to art. 77 of the Italian Constitution, the Government exercises this power just in case of extreme need and urgency. The act needs to then be converted by the Parliament into an ordinary law. In spite of the requirements of extreme need and urgency, it is common practice of Governments to make use of Decree laws, some of which have been into force for decades.

[9] As its nature of “Specific legislative act”; see, among others, Italian Constitutional Court 143/1989, 346/1991, 492/1995, 267/2007, 241/2008 e 137/2009 and CJEU, Joined Cases C‑128/09 to C‑131/09, C‑134/09 and C‑135/09, Boxus et al., 18 October 2011

[10] G. Arcorzo, Note critiche sul “decreto legge ad Ilvam”, tra legislazione provvedimentale, riserva di funzione giurisdizionale e dovere di repressione e prevenzione dei reati, 20 December 2012; A. Sperti, Alcune riflessioni sui profili costituzionali del decreto Ilva, 17 December 2012

[11] The nature of the claims raised is extremely convoluted, as they range from the actual division of competence between different branches of Government to the nature of preventive precautionary measures. On this point see D. Pulitanò, Fra Giustizia Penale E Gestione Amministrativa: Riflessioni A Margine Del Caso Ilva, 22 February 2013

[12] A. Morelli, Il decreto Ilva: un drammatico bilanciamento tra principi costituzionali, 12 December 2012

[13]As recalled by the Court (§12.6) the problem of attribution of powers in the judgement at hand lies in the problematic aspect of preventive precautionary measures. When issuing a precautionary measure, the judge is called on providing a preventive balance to stop the effects of the crime to take place. However, the discretion of the legislative power to strike a new balance remains unchanged.  R. Bin, Giurisdizione o amministrazione, chi deve prevenire i reati ambientali? Nota alla sentenza "Ilva", 2013; V. Onida, Un Conflitto Fra Poteri Sotto La Veste Di Questione Di Costituzionalità: Amministrazione E Giurisdizione Per La Tutela Dell’ambiente. Nota A Corte Costituzionale, Sentenza N. 85 Del 2013, 2013

[14] It is controversial whether the arguments of Opinion 85/2013 would hold here, since accidents in the workplace are regulated by parliamentary laws, and not by administrative acts. Indeed a new complaint has been lodged to the Constitutional Court by the GIP. See S. Zirulia, In Vigore Un Nuovo Decreto 'Salva Ilva' (E Anche Fincantieri), 2015

[15] European Parliament, The Ilva Industrial Site in Taranto, Envi Committee, 7

Editor’s note: Abdurrahman is currently working for Doing Business Right project at the Asser Institute as an intern. He received his LL.M. International and European Law from Tilburg University and currently he is a Research Master student at the same university.

1. Introduction

The 2011 update of the OECD Guidelines for Multinational Enterprises (hereinafter ‘Guidelines’-for some introductory information, see here) introduced various changes to the 2000 text of the Guidelines, including a whole new chapter on human rights in line with the UN Guiding Principles on Business and Human Rights. National Contact Points (NCPs) - non-binding, state-based, non-judicial grievance mechanisms established by the adhering states - have since then concluded approximately 60 cases submitted under the newly-introduced human rights chapter.

If an NCP believes that the issues raised in a submission merit further consideration, it accepts the complaint, prepares an initial assessment report and offers its good offices to the parties of the complaint.[1] Parties may reject the offer, accept the offer but fail to reach an agreement in the mediation or, if everything goes well, reach an agreement. In any of these scenarios, the NCP concludes the specific instance with a final assessment report.[2] Between the initial and final assessment reports, however, NCPs are not required to communicate details of the ongoing mediations to the public. Nor do they have to provide any specific details about the agreement of the parties, if at all, along with or after the final report.^[3]

NCPs aim to promote the effectiveness of the Guidelines, to handle enquiries and to use a complaint procedure (so-called specific instance procedure) to facilitate settlements of disputes that may arise in case of non-compliance with the Guidelines by enterprises. Although to provide effective remedies to victims of business-related human rights abuses is not explicitly included among their aims, NCPs have the potential to serve as a forum to which victims can turn to obtain effective remedies.[4] They can receive complaints alleging the violation of internationally recognized human rights and offer mediation to the parties of the complaint to find a solution on which both parties agree upon.

In more than 20 out of these approximately 60 cases concluded, parties to the dispute reached a settlement through a mediation procedure facilitated by the NCP. These cases are considered ‘successful’ or ‘positive’ by the OECD.[5] But can these really be considered as such? Do the NCPs function as an effective grievance mechanism which provides access to remedies to victims of business-related human rights abuses in the cases they have settled? Or were these cases found successful only because the NCPs dealing with them claim so, regardless of the actual remedies provided? In this blog, I will elaborate on the concept of ‘success’ as used by the OECD and how the cloudy nature of the procedure raises questions about the successful conclusion of the cases and of the role of NCPs in this regard.

2. Transparency of the Procedure

Transparency provisions regarding the complaint procedure before an NCP can be found in the Procedural Guidance of the OECD Guidelines. The importance of transparency as a general principle in establishing the accountability of an NCP is stressed, but in relation to finding a balance with confidentiality.^[6] This balance is considered important in ensuring the effectiveness of NCPs, as well as gaining the trust of the parties to the dispute. In particular, sensitive business information, identities of individuals participating in the procedures and proceedings related to the implementation of the Guidelines will normally remain confidential, while only the final results of the procedure will be shared with the public.^[7] Similar emphasis on striking a balance between confidentiality and transparency can also be found in some of the NCPs’ own procedural guidance (see for example here and here).

In reality, different NCPs have a very different understanding of transparency and it is difficult to assess whether they comply with the Guidelines’ transparency requirements and strike a fair balance between transparency and confidentiality. Take the US NCP for example. According to its procedural rules, the principle is confidentiality - that is, the communications of the parties either with each other or with the NCP should remain completely confidential. Without the consent of the other party, no party may disclose any communication or information provided during the proceedings. The failure to comply can result in the termination of the mediation. Moreover, the US NCP often does not publish statements concerning the pending complaints.^[8] Some NCPs, such as the Korean NCP,^[9] do not even inform the parties about their final decisions and the conclusion of their case.

This sacrifice of transparency for the sake of confidentiality in the proceedings comes with its drawbacks. It prevents outsiders, namely other stakeholders who are not party to the dispute, from expressing an informed critique of the NCPs and their effectiveness. As an important consequence of confidentiality at the NCPs, the causal link drawn by some OECD staff[10] between the work of the NCPs and the final agreements between parties becomes quite difficult to scrutinize and open to questions. Relying on three short case studies linked to disputes handled by different NCPs, I will argue that the claimed effectiveness of NCPs would gain credibility if they were acting in a more transparent fashion.  

3. Transparency is essential because …

a.     …what an NCP considers successful is not always so

In June 2013, a complaint was submitted to the Brazilian NCP concerning the activities of a subsidiary of Kinross, a Canadian Mining Company, and its alleged detrimental impacts on the environment which caused harm to lives and houses of people living around one of the company’s gold mines. The NCP invited parties to mediation and, in late 2016, the parties reached an agreement. In the final report of the Brazilian NCP, the details of the agreement between the parties were not shared publicly. Yet, it is known that Kinross committed to compensate the damages done to houses despite the lack of proven causal link between its operations and the damages, and the NCP recommended that Kinross exercise due diligence in order to assess the impacts of its operations in the future.[11] This outcome is unique in that it is one of the few NCP cases in which a company compensated past damages. However, a report published by two NGOs in 2017 cast some doubt on this "success story". In spite of the Brazilian NCP’s recommendation to exercise due diligence, the report claimed that an ensuing expansion project of the company displaced hundreds of residents of traditional communities^[12] and that adverse environmental impact of the mine continued.^[13]

Although the settlement was considered successful,^[14] evidence shows that this conclusion might be premature considering the company again faces similar allegations to those raised initially. Compensation for material damages and satisfaction of victims by ceasing the actions that caused human rights abuses are two types of remedies for human rights violations under international law.^[15] These remedies, namely compensation of house damages and satisfaction in the form of conducting due diligence to prevent future violations, were also expected to be provided according to the final report of the NCP on the Kinross case.[16] Nevertheless, in the Kinross case, past violations which led to the initial intervention of the NCP were allegedly repeated. Therefore, in that case, the original settlement can hardly be considered as an effective remedy as it failed to prevent Kinross from committing similar violations again. Hence, it is fair to claim that the settlement did not change the situation on the ground for the victims and that the work of the NCP was probably not as successful as claimed.

The only public document that can be reached through the OECD’s website is the final statement of the NCP concluding the case. However, this document provides neither a detailed account of the proceedings nor of the agreement reached by the parties. Because the details of the agreement are unknown, the outcome of the case is hard to evaluate. It is only after the publication of an NGO report and its disclosure of some information related to the agreement that it has become easier to assess the success of the case. Access to information regarding settlements brokered by the NCPs is of great importance to determine their effectiveness as well as to hold multinational enterprises (MNEs) accountable for their commitments.

b.     …it will help increase public pressure on companies

In October 2013, World Wildlife Fund (WWF) filed a complaint to the UK NCP claiming that the activities of SOCO, a British oil and gas exploration company, in a part of the Virunga National Park in the Democratic Republic of Congo (DRC), a world heritage site, cause environmental degradations and threatens the life of local communities. In February 2014, the NCP invited both parties to mediation and, in June 2014, parties reached an agreement before the NCP. According to the settlement, SOCO agreed to halt its operations and to resume drilling within the park only if UNESCO and the DRC government confirmed that to do so would not impede on its world heritage status.^[17] Moreover, SOCO committed not to conduct any operation in any other world heritage site in the future and to align its due diligence assessments with international standards and best practices in the industry. It was the first time a company agreed to cease its operations after a procedure before an NCP.

At first glance, this settlement may be viewed as an impressive success of the NCP. However, there were also some other external factors which contributed decisively to this outcome. First of all, WWF initiated an advertisement campaign which increased the publicity of the case substantially. As part of the campaign, shareholders of SOCO were prompted to rethink their investments, some influential individuals were prodded into action and an award-winning documentary on the issue was released. Furthermore, some officials of the EU and British government expressed their concerns and opposition about the operations of SOCO in Virunga. Lastly, hundreds of thousands of people around the world participated in the global campaign and signed a petition asking SOCO to abandon its plans in the DRC.

The increased public scrutiny of the complaint and the efforts of WWF put considerable pressure on SOCO and forced it to make statements regarding the case to justify its operations while not allowing it to keep the complaint out of the public eye. This case is illustrative of the potential impact of publicity on the outcome of a case pending before an NCP. The impact of public scrutiny on the management decisions of a company nudging it towards the mediation table is also visible in other cases. In one case, highlighted by OECD Watch in its latest report, company representatives admitted the public attention’s power to push them towards constructive engagement at the NCPs.[18]  The study also emphasized, based on a number of NCP cases, the detrimental impacts of the strict confidentiality requirements of the NCPs on the mediations.[19] This tells us that external factors, such as the public interest raised by a particular case, might contribute at least as much as the NCPs internal work to the successful resolution of a complaint. Moreover, it is likely that greater transparency from the part of the NCPs would generate greater public awareness and scrutiny and ease the organization of worldwide public campaigns, such as the one put together by WWF. Such publicity at (and around) the NCPs might very well be a key component of their effectiveness as a state-based non-judicial grievance mechanism. 

c.     …it will ease the assessment of the link between the work of an NCP and the settlement of a case

As we have seen in the previous section, mediations before the NCPs are not isolated from external influences. There may well be some external factors that actively contribute to a settlement. These external factors may include, among others, regulatory or legislative concerns, NGO activism or shareholder pressure. This external influence might render it difficult to draw a direct causal link between the work of an NCP and the settlement of a case. On top of that, the lack of transparency of the mediations exacerbates this difficulty by hiding many details concerning the proceedings and how, and whether, the NCP contributed to the settlement. Below, I discuss three settled cases in which external factors exerted significant pressure on companies during the mediation process at an NCP pushing them towards agreeing to a settlement.

In May 2013, the German NCP received a complaint by a German MP about three German MNEs which sourced from the burned-down Tazreen Fashion garment factory in Bangladesh, alleging that the MNEs did not comply with the OECD Guidelines when sourcing from this factory. The NCP accepted the complaint for further consideration and led mediation talks between the parties which culminated in a settlement. With the settlement, the companies agreed on the importance of workers’ rights and safety in their supply chains and committed to taking some measures to improve the fire and building safety standards of their suppliers in Bangladesh. However, the filing of the complaint and the NCP procedure coincided with the aftermath of the Rana Plaza disaster and the ensuing global outcry. Since the Rana Plaza collapse, Bangladesh has been targeted by many international and local initiatives to improve the working conditions of workers and protect labor rights. In this context, it is not straightforward to attribute the changes in the behavior of the aforementioned German companies to the non-binding German NCP procedure and the settlement of the complaint.

In March 2015, a case was submitted to the Dutch NCP concerning a Dutch pharmaceutical company, Mylan N.V., selling medicines that were used in the execution of death penalties in the US. After concluding that the case merited further discussion, the NCP facilitated mediation between the parties to the complaint. In April 2016, the complaint was settled. Accordingly, Mylan promised to enhance its due diligence and took active steps to prevent the use of its products in lethal injections in the US prisons. However, after the submission of the complaint, Mylan’s activities were also questioned in the Dutch Parliament and the responsibility of Mylan to prevent its products from being used in serious human rights violations was highlighted.[20] More importantly, some shareholders voiced their concerns about the controversial use of its products. Additionally, a pension fund announced that it sold all its shares in Mylan and would not invest in the company anymore.[21] Here again, it is not easy to disentangle what or who led Mylan to change its policies. In any case, the pressure applied by other actors was certainly not irrelevant to the final outcome of the case before the NCP.

Finally, in October 2012, an indigenous community in Sweden filed a complaint with the Swedish and Norwegian NCPs, claiming that Statkraft, a Norwegian MNE, violated their indigenous rights by planning to build a wind power plant on their herding ground. Both NCPs accepted the complaint with Norway taking the lead. Although various informal and official mediation meetings were held, the parties could not reach an agreement. The Norwegian NCP concluded the case in June 2014 and both NCPs issued their final statement in February 2016. However, a few months later, the parties of the complaint announced that they reached an agreement on their own, in order to reduce the detrimental impacts of the wind farm on the indigenous community. In this case, although the settlement was hailed as a success by the NCPs and the OECD,^[22] the extent to which the NCPs contributed to the settlement is uncertain considering that it took place outside the process before the NCPs.

All these settlements share a commonality. In each case, there were some significant external factors which probably affected the outcome of the case and contributed to the settlement. Consequently, these other factors question the existence of a direct link between the NCP procedure and the conclusion of a settlement, and lead to some doubts about the capacity of the NCPs to provoke on their own the successful resolution of the disputes. Indeed, if a conjunction of external factors, such as shareholder involvement, public outrage or political intervention, is necessary for a case to be successfully settled at an NCP, then it is less the NCP process as much its general context that matters. Such a conclusion would lend some support the existing skepticism regarding the capacity of the NCPs to provide an effective remedy by themselves.^[23]  In any case, more transparency during the proceedings would make it easier to measure the real impact of the NCPs on the final outcome.

4. Conclusion

In conclusion, the NCPs should not fear an increase in transparency. Indeed, it is in their best interest to showcase the concrete impact of their work in specific cases. Firstly, publicity will arouse the interest of other actors, such as shareholders, politicians and the public. These actors can have a determining influence on the positive resolution of complaints before the NCPs. They can put pressure on companies, while the NCPs are deprived of strong bargaining power. Secondly, more transparency is key to a better assessment of the work of the NCPs. The current level of secrecy raises reasonable doubts regarding the NCPs' capacity to trigger the successful settlement of complaints. Greater publicity is essential to support the OECD’s claim that NCPs provide an effective remedy for the victims of human rights violations. This is supported by OECD Watch which considered recently “imbalanced or unduly restrictive policies on transparency and confidentiality” one of the primary reasons for the failure of NCPs to provide an effective remedy.[24] Moreover, it would lead to productive critical engagement with the NCPs' strategies in leading the parties towards a specific settlement and heighten their public accountability.  

Transparency does not entail the dissemination of every piece of information related to NCP proceedings. Indeed, companies should not be obliged to reveal unrelated/important trade secrets (and victims as well as witnesses should be able to stay anonymous for security reasons). However, it is unlikely that many of the pieces of information that may be revealed during NCP mediations will be of this kind. In any event, the following documents should be systematically published:

• Complainant positions on the dispute (with names redacted if necessary to protect the victims or whistleblowers from potential retaliation)
• Company positions on the dispute (with confidential trade secrets redacted)
• NCPs proposition of settlement
• Complainant and company positions on a potential settlement
• Final settlement

The OECD Guidelines and the specific instance procedure are potentially promising avenues to deal with business-related human rights violations. The procedure has some advantages like having lower formal requirements than the submission of a judicial case and bringing companies and victims around a table to assist them to solve the issue outside of judicial proceedings. Nevertheless, as argued by John Ruggie himself there is still a long way to go to increase the effectiveness of the NCPs and to ensure that they provide effective remedies for complainants.^[25] Significantly increasing the transparency of the NCP specific instance procedure is key to ensuring the full compliance of MNEs (and adhering states) with the Guidelines and with the spirit and letter of the UNGPs.

[1] OECD, OECD Guidelines for Multinational Enterprises (OECD Publishing, 2011) 72,84.

[2] ibid, 73,85.

[3] ibid.

[4] OECD, Implementing the OECD Guidelines for Multinational Enterprises: The National Contact Points from 2000 to 2015 (OECD Publishing, 2016) 30; UN Human Rights Council, ‘Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises’ (2008) UN Doc A/HRC/8/5 para.98.

[5] See for some ‘successful’ and ‘positive’ cases: US NCP, Specific Instance between the International Union of Food, Agriculture, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations (IUF) and Starwood Hotels & Resorts Worldwide for conduct in the Maldives and Ethiopia (2016) <https://www.state.gov/e/eb/oecd/usncp/specificinstance/finalstatements/257110.htm>  accessed 03 May 2018; UK NCP, Complaint by ADHRB against Formula One Group companies (2015) <http://mneguidelines.oecd.org/database/instances/uk0042.htm>  accessed 03 May 2018; Norwegian NCP, Mediated Outcome between The Association for International Water Studies (FIVAS) and Norconsult AS (2015) <http://nettsteder.regjeringen.no/ansvarlignaringsliv-en/files/2015/11/150622-Final-Statement-FIVAS-and-Norconsult-FINAL.pdf> accessed 03 May 2018.

[6] OECD (n 1) 79.

[7] ibid 85.

[8] Evaristus Oshionebo, ‘The OECD Guidelines for Multinational Enterprises as Mechanisms for Sustainable Development of Natural Resources: Real Solutions or Window Dressing’ (2013) 17 (2) Lewis & Clark L. Rev. 545, 580.

[9] OECD Watch, Remedy Remains Rare (2015) 37.

[10] Roel Nieuwenkamp, ‘Outcomes from OECD National Contact Point cases: More remedy than you may think!’ (Cambridge Core Blog, 2017) <http://blog.journals.cambridge.org/2017/11/10/outcomes-from-oecd-national-contact-point-cases-more-remedy-than-you-may-think/>  accessed 03 May 2018.

[11] Brazilian NCP, Final Report-KINROSS Gold Corporation vs. Association of Neighborhoods of Paracatu (2016) <http://mneguidelines.oecd.org/database/instances/br0020.htm> accessed 03 May 2018.

[12] Above Ground and Justiça Global, Swept Aside: An Investigation into Human Rights Abuse at Kinross Gold’s Morro do Ouro Mine (2017) 11.

[13] ibid 29.

[14] Nieuwenkamp (n 10).

[15] UNGA Res 60/147 (16 December 2005) UN Doc A/RES/60/147.

[16] Brazilian NCP (n 11).

[17] Joint Statement by SOCO International PLC (‘SOCO’) and WWF (2014).

[18] OECD Watch, The State of Remedy under the OECD Guidelines (2018) 12.

[19] ibid 11-12.

[20] Dutch NCP, Final Statement on Bart Stapert, attorney vs. Mylan (2016) 3.

[21] ibid.

[22] Nieuwenkamp (n 10).

[23] See for examples of questioning of the NCPs: OECD Watch (n 9); Oshinebo (n 8); Scott Robinson, ‘International Obligations, State Responsibility and Judicial Review under the OECD Guidelines for Multinational Enterprises Regime’ (2014) 30 Utrecht J. Int'l & Eur. L. 68, 79; Bernadette Maheandiran, ‘Calling for Clarity: How Uncertainty Undermines the Legitimacy of the Dispute Resolution System under the OECD Guidelines for Multinational Enterprises’ (2015) 20 Harv. Negot. L. Rev. 205, 243.

[24] OECD Watch (n 18) 7.

[25] John Gerard Ruggie and Tamaryn Nelson, ‘Human Rights and the OECD Guidelines for Multinational Enterprises: Normative Innovations and Implementations Challenges’ (2015) 22 Brown J. World Aff. 99, 121.

The Asser Institute today is hosting the event Towards Criminal Liability of Corporations for Human Rights Violations: The Lundin Case in Sweden. Below is some relevant background to the case.

The Case:

Following its initiation in June 2010, the Swedish Prosecution Authority (SPA) recently concluded its investigation into the Swedish oil company Lundin Petroleum SA for aiding and abetting war crimes and crimes against humanity. 

Alex Schneiter (Lundin’s current CEO and head of exploration at the time of the harms) and Ian Lundin (Chairman and son of its founder) have received the final notice of the case from the SPA. The Swedish government approved the request to indict by prosecutors (as is necessary under Swedish law when investigating extraterritorial offences). The trial is projected to start in the summer of 2019, and the two men face life sentences if convicted.

While the two businessmen face personal charges, the company itself, Lundin Petroleum, also received a notification from the Swedish Prosecution Authority on 1 November 2018 that the company may be liable to a corporate fine and forfeiture of economic benefits. According to Miriam Ingeson and Alexandra Lily Kather, in the Swedish context “a corporate fine is not considered a penalty for a crime but is an extraordinary legal remedy serving as a repressive sanction supplanting corporate criminal liability.”^[1]

In 2019, the Supreme Administrative Court denied Lundin’s appeal to override the Swedish Government’s decision to allow the prosecution, and Swedish police have opened a criminal investigation into harassment of witnesses in the case.

The 'Unpaid Debt' Report:

The case arose from a report by European Coalition on Oil in Sudan (ECOS) entitled Unpaid Debt. According to the Unpaid Debt report, a group of Sudanese civil society organisations called upon European Coalition on Oil in Sudan to assist with their pursuit of compensation and reparation for the harms perpetrated during Sudan’s oil wars.

The Accusations:

The Unpaid Debt report links Lundin Consortium’s commencement of oil exploitation with sparking war in Block 5A, and the company's construction of infrastructure with aiding in crimes against local communities and their consequent displacement. 

In February 1997, the Lundin Group signed an agreement for exploration and production rights in Block 5A in Southern Sudan. This oil concession area was located south of Bentiu on the West Bank of the White Nile in Western Upper Nile/Unity State. A Lundin subsidiary, IPC, was head of the consortium set up to explore the 5A oil field (40.4% stake). Malaysia’s Petronas Carigali Overseas (26.1%), Austria’s OMV (Sudan) Exploration (26.1%) and Sudan’s Sudapet (5%) composed up the remainder of the consortium.^[2] 

“They signed a contract with the Government for the exploitation of oil in the concession area called Block 5A that was not at that time under full Government control. The start of oil exploitation set off a vicious war in the area. Between 1997 and 2003, international crimes were committed on a large scale in what was essentially a military campaign by the Government of Sudan to secure and take control of the oil fields in Block 5A.” [p 5 Unpaid Debt]

The Consortium worked on a road and an airstrip in collaboration with the Sudanese military, which allowed “systematic attacks” on villages that have been described as “an orgy of raiding and looting”.^[3] The damages listed include forced displacement (changes in farming activity 1994-2003 evidence displacement from Block 5A); deaths; destruction of dwellings; destruction of livelihood; and looting and destruction of cattle. Lundin sold out of the area in question (what was then Sudan) in 2003.

PAX has stated:

“The crimes alleged in the Lundin case include the intentional targeting of civilians, violent displacement, deliberate destruction of livelihoods, rape, torture, arson, pillage, and the use of child soldiers. An estimated 12,000 people died and 160,000 were displaced in the area were the Lundin Consortium, which included Petronas from Malaysia and OMV from Austria, was active between 1997 and 2003.”

Lundin’s response:

Lundin has a SKr95.6bn ($10.6bn) market capitalisation, and 27.7 per cent of the company is owned by the Lundin family trust.^[4]  

Concerning the ‘Unpaid Debt’ report: “This report makes false and baseless allegations against the Company when its subsidiary was the operator of Block 5A in Sudan between the period 1997 to 2003. The Prosecution Authority has evidently decided to largely take this report, as well as other reports written by different NGOs, at face value. These reports contain many inaccuracies and deficiencies with multiple layers of hearsay and information taken from propaganda materials and sources, which was a common theme of the conflict in the wider country”

Concerning the case: “The suspicions are based on a biased and wrongful perception of criminal liability for conducting legitimate business activities and, as far as we are aware, this has never been previously tried in any national or international court. The Prosecution Authority is looking to establish a test case by applying a standard which extends beyond international law for responsibility of individuals and companies for alleged actions of a sovereign state. Far from being indifferent to the conflict, which erupted in the region during the period, the Company did everything in its power to promote peace through peaceful means.”

The Country:

Swedish prosecutors have universal jurisdiction for particular international crimes – it was used in past to prosecute three individuals involved in the Rwandan genocide, and The Stockholm District Court has tried several cases of war crimes and crimes against humanity committed during the Balkan Wars. The first case in Sweden convicting an individual for violations of international criminal or humanitarian law was that of Jackie Arklöv by the Stockholm district court on 18 December 2006 for crimes perpetrated against prisoners of war in the Balkan conflict.

Government authorisation is necessary in these cases for prosecution due to extraterritorial elements:

“The requirement of authorization is due to the structure of the rules on extraterritorial jurisdiction enshrined in the second chapter of the Penal Code. Chapter 2, Section 3 provides for extraterritorial jurisdiction for war crimes based on the universality principle, as well as for any grave crime carrying a minimum penalty of four years in prison. The latter category enables Sweden to fulfill obligations in international cooperation and proactively pursue violations of national interest based on the passive nationality and protective principle.” ^[5]

In this case, Lundin appealed the government’s decision, however this appeal was unsuccessful. 

Wider interest:

Prosecutions for the involvement of corporate actors in international crimes are rare, so this case is being observed closely. Though the Swedish system does not allow for criminal liability for the corporation itself, the closest punitive equivalent is being levelled at Lundin, and company directors are facing criminal prosecution. Between this and the French Lafarge case concerning corporate criminal liability for international crimes in Syria,^[6] it appears that some European courts are becoming more willing to draw the line between far-off international crimes and their own European-headquartered companies.

For more context concerning the historical liability of corporate actors under international criminal law, see the parts one and two of this blog’s International Criminal Law and Corporate Actors series. 

^[1] Miriam Ingeson and Alexandra Lily Kather, ‘The Road Less Traveled: How Corporate Directors Could be Held Individually Liable in Sweden for Corporate Atrocity Crimes Abroad’.

^[2] See https://www.newframe.com/lundins-south-sudan-ties-hit-south-african-shores/

^[3] Unpaid Debt report, p 31.

^[4] See https://www.ft.com/content/c7295ae6-d2cf-11e8-a9f2-7574db66bcd5

^[5] Miriam Ingeson and Alexandra Lily Kather, ‘The Road Less Traveled: How Corporate Directors Could be Held Individually Liable in Sweden for Corporate Atrocity Crimes Abroad’.

^[6] For more background on this case, see the previous Doing Business Right post by Alexandru Tofan.

On Thursday (2 November), the T.M.C. Asser Instituut hosted a roundtable on the role of financial institutions in ensuring responsible business conduct and, in particular, fostering respect for human rights. The discussion focused on the Dutch Banking Sector Agreement on international responsible business conduct regarding human rights (DBSA or Agreement), including details of its key features and the practicalities of its implementation, alongside the theme of responsible banking more generally.

Panellists:

• Ruben Zandvliet: Advisor Environmental, Social, and Ethical Risk & Policies at ABN Amro
• Benjamin Thompson: Program Officer, Business and Human Rights at PAX
• Tessel van Westen: Senior Policy Officer International CSR Unit, Dutch Ministry of Foreign Affairs
• Maryse Hazelzet: Advisory Sustainability at NVB
• Ryan Brightwell: Researcher and Editor at BankTrack

Our panellists explored the background to the DBSA, negotiated and agreed under the auspices of the Social and Economic Council of the Netherlands (SER). The speakers emphasised the cooperative multi-stakeholder approach to decision making (known as the Polder model) under the SER that led to the adoption of the Agreement by its signatories, including the Dutch government, the Dutch Banking Association (NVB), leading Dutch banks, trade union federations and certain international civil society organisations. Each panellist gave their organisation’s perspective on the hurdles apparent prior to and since conclusion of the DBSA (such as action on sustainability that appeared to be at odds with competition law constraints), their views of the aims and expectations of the DBSA (including better transparency, due diligence processes and complaints mechanisms) as well as their organisation’s role in the DBSA’s implementation once agreed.

The speakers discussed the prospects for and challenges in respect of the implementation of the DBSA. While private codes of conduct may be precise and verifiable in terms of the expected conduct, they are often set below the requirements of international law. Further dialogue is required between the parties to ascertain what conduct on the part of the banks is consistent with international obligations. The panellists expressly recognised the advantages of referencing international standards applicable to banking (such as more stringent applicable human rights standards), however in need of implementing provisions they may be. Among other objectives, the Agreement aims at solving the interpretative ambiguities inherent in the UNGPs. There are however many challenges. The speakers explored some of these difficulties, for example relating to the nature of the relationships between banks and their clients, or pertaining to the specificities of the financial industry such as in the case of syndicated loans. Further difficulties discussed included banks’ lack of visibility of the value chain in any given transaction and the ethical and compliance issues arising in respect of financing activity affecting certain industries including, for example, the arms trade and sex work.

The discussion also touched on the next steps and specific ongoing processes in implementing the DBSA in order to achieve positive human rights-consistent outcomes. At this point, the panellists stressed the ‘work in progress’ status of the DBSA and agreed that it would be premature to speculate at this point whether the DBSA will achieve tangible, positive outcomes. There was, however, a general consensus on the need for a continuation of the collaborative multi-stakeholder approach leading to the adoption of the DBSA – a novel approach in the banking industry that was largely seen to be “working”, at least in respect of helping different stakeholders understand one another’s concerns. The panellists generally agreed that multi-stakeholder dialogue should permeate the way forward vis-à-vis the implementation of the DBSA; ways should be found to further integrate (particularly civil society and local) stakeholders into the monitoring and decision-making processes of banks as well as when deciphering new ways to increase leverage in relation to borrowing companies in order to increase human rights compliance “on the ground”. The suggestion that clear guidelines for banks and companies should be set in respect of their human rights responsibilities was welcomed, and particular tools (including a working group) being set up to this end were noted in the discussion. The speakers emphasised the importance of (and the need to improve) the banking sector’s own internal due diligence and client engagement processes.

The roundtable concluded with a lively and thought-provoking discussion in the Q&A section between the speakers and audience touching on a number of topics including (inter alia and in addition to some of the themes mentioned above): the desirability, nature and potential functionality of binding due diligence legislation for banks; human rights-related arbitration and applicable law clauses in contracts; and how new digital technologies (such as blockchain) could help address problems and difficulties faced by banks carrying out human rights due diligence. 

The panellists viewed the path ahead as undeniably challenging given certain practical questions that need answering and the further work required with respect to the implementation of the Agreement – yet they ultimately agreed that this approach could have the potential to improve banks’ human rights performance. The speakers now continue to be engaged in the operationalization of the Agreement, which incorporates a timeframe for evaluating its impact and effectiveness.