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.
- 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.
- 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.
- 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.
- 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.