10 años de las Directrices de la OCDE

8/9/2019 10 aos de las Directrices de la OCDE

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ECD Watch

Assessing thecontribution of theOECD Guidelinesfor MultinationalEnterprises to

responsiblebusiness conduct

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Years On

June 2010

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Acknowledgements

Colophon

10 Years On: Assessing the contribution of the OECD

Guidelines for Multinational Enterprises to responsible

business conduct

June 2010

Authors:Joris Oldenziel (SOMO), Joseph Wilde-Ramsing

(SOMO) & Patricia Feeney (RAID)

Graphic design:Justine van Heusden, JUSTAR.NL

Printer:Drukkerij Leijten

Photo credits cases: 1 SOMO, 2 University of Papua

New Guinea, Australian Conservation Foundation,

3 iStockphoto, 4 C.R. Bassett, 5 RAID, 6 Global Witness,

7 Agostina Chiodi, FOCO-INPADE,8 iStockphoto,

9 Shwe Gas Movement, 10 Cory Wanless, 11 Survival

International

Publisher: OECD Watch, www.oecdwatch.org

ISBN 9789071284595

License:This publication is licensed under the Creative

Commons Attribution-NonCommercial- 3.0 Netherlands

license.

Funding: This document has been produced with the

financial assistance of the Netherlands Ministry of Foreign

Affairs, Oxfam Novib and the Human Rights at Work

Foundation (FDHT).

This report is the result of a collaborative effort. OECD

Watch would like to thank all the organisations and

individuals both within and beyond the OECD Watch

network that have contributed to the drafting of this

report. The authors also wish to express their gratitude

for all the people and organisations involved in the case

studies that are featured in the report. The authors would

specifically like to thank Colleen Freeman, Tessel Pauli

(Clean Clothes Campaign), Charles Berger (Australian

Conservation Foundation), Seema Joshi and Lizzie Parsons

(Global Witness), Vernica Cipolatti (CEDHA), Agostina

Chiodi (FOCO-INPADE), Jonathan Kaufman (Earth Rights

International), Nick Hildyard (The Corner House), Lindsay

Duffield (Survival International), Federico Arenoso (Poder

Ciudadano), and Cory Wanless (Klippensteins Barristers &

Solicitors) for the insights they have given in their specific

case studies. Thanks also goes to Shirley van Buiren

(Transparency International German Chapter), Paul de

Clerck (Friends of the Earth Europe), Cornelia Heydenreich

(Germanwatch), Serena Lillywhite (Oxfam Australia), Shanta

Martin (Amnesty International), Aly Sagne (La Lumire),

Gunhild rstavik (ForUM), Victor Ricco (CEDHA), and Roda

Verheyen for their time and efforts into providing critical

comments and good ideas to sharpen the report. Kirstine

Drew (TUAC) provided valuable perspectives on trade

unions experiences with the Guidelines. Finally, Virginia

Sandjojo (SOMO) deserves thanks for her hard work and

enormous efforts to help improve and finalize the report.


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05 Introduction: A golden opportunity

05 A call or corporate accountability05 The Guidelines 1976 to 201006 Outline o the report

09 The acts: Statistics o the OECD Watch case database

09 Nearly 100 NGO cases iled09 Most common type o cases10 Uneven distribution o cases among NCPs

10 Most common case outcomes11 Trade union case statistics

13 Experience rom the ield

13 Extractive industries16 Finance sector18 Manuacturing industries

21 The bright side: Positive elements in the OECD Guidelines mechanism

21 Mediated agreements, NCP statements and (some) improved behaviour22 Positive indirect impacts and procedural elements23 The caveats

29 Critical issues or the review (i): Supply chains and trade relations

29 Cases related to value chains and trade relations30 Deining the scope

33 Critical issues or the review (ii): Human rights

34 Human rights cases34 Strenghtening human rights

38 Critical issues or the review (iii): Environment & climate change38 Environment cases38 The business contribution to climate change

43 Due process

43 Functional equivalence46 Parallel legal proceedings46 Overview of cases46 The need for clarification50 Powers and mandate

50 Lack of teeth?

54 Conclusions

56 Annex: All 96 NGO cases as o June 2010

Table oContents


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09 Figure: Chronological distribution of cases filed by NGOs, 2001-2010

10 Figure: Number of NGO caess received, by NCP, 2001-2010

10 Figure: NGO cases by violation, 2001-2010

11 Figure: NGO cases by status, as of June 2010

14 Case 1: The UN, conflict, and the Congos natural resources

17 Case 2 : Financial facilitation of destructive forestry in Papua New Guinea

19 Case 3: Labour rights in the garment industry

24 Table 1: Overview of positive elements with caveats of cases filed byNGOs, 2001-2010

28 Case 4: Oil-for-Food scandal in Iraq

32 Case 5: Indiscriminate bombing in the DRC

36 Case 6: Controversial mineral trading in the DRC

40 Case 7: A villa suffers while an OECD case lingers

42 Case 8: Better late than never

44 Case 9: Missed opportunity to prevent human rights abuse in Burma

48 Case 10: No follow-up Zambian copper mine agreements

52 Case 11: Guidelines unable to protect indegenous people in India

List o tables,igures and

boxes


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The year 2010 is an important year in globalcorporate responsibility and accountability.The UN Global Compact is marking its 10-yearanniversary, the ISO 26000 Guidance on SocialResponsibility is being inalised ater manyyears o multi-stakeholder consultations, theInternational Finance Corporation is reviewingand updating its Policy and Perormance

Standards on Social and EnvironmentalSustainability, and Proessor John Ruggie,appointed the Special Representative to the UNSecretary-General on Business and Human Rights(SRSG), is in the inal ull year o his mandate.Perhaps the most signiicant event, however, isrelated to the OECD Guidelines or MultinationalEnterprises (OECD Guidelines), one o the keyinternational instruments or promoting corporateresponsibility. Not only are the OECD Guidelinesmarking the 10-year anniversary since their lastrevision in 2000, but June 2010 also inds uson the eve o a new year-long process to revise,update, and upgrade the OECD Guidelines. Thereview is a make-or-break moment and providesa golden opportunity to ensure that the OECDGuidelines are given the necessary scope andinstitutional authority to make them an eectivecorporate accountability tool.

A call or corporate accountability

Not coincidentally, recent years have alsowitnessed an intensiication o concerns regardingthe impacts o corporations on human rights,labour rights and the environment. While theprivate sector can be a powerul driver oeconomic prosperity and poverty alleviation, agrowing body o evidence conirms that, withoutthe necessary due diligence, disclosure andaccountability checks, multinational enterprises(MNEs) can have a signiicant negative impact

on workers, communities and the naturalenvironment.1 There is now widespreadacknowledgement that MNEs are required tobe responsible or avoiding or remedying anynegative consequences o the ull range o their

business activities. The principles o do noharm and, when things do go wrong, providinga remedy or the victims, must be upheld throughcorporate accountability mechanisms.

The increasing requency o global crises withregard to ood, climate, energy, and mostrecently inance and the global economy

has urther highlighted the scale o impactthat irresponsible and unsustainable businessbehaviour can have on society. More than ever,there is an urgent need to ully and completelyintegrate the notion o rights-based sustainabledevelopment, with its equally-balanced social,environmental and economic components, intobusiness practice.

Although the rapid expansion in both thenumber and scope o voluntary corporatesocial responsibility (CSR) initiatives was initiallyhailed as a highly promising solution to theshortcomings o state regulation, such initiativeshave also been sharply criticised on the groundsthat voluntary instruments are inherentlyincapable o addressing market and regulatoryailures. Indeed, recent academic research andthe inancial crisis indicate that sel-regulation andinitiatives that rely wholly on a voluntary approachto improving business behaviour have major

limitations.2 Thereore, international corporateresponsibility and accountability instruments like the OECD Guidelines must be signiicantlystrengthened to ensure that business, civil society,and governments succeed in meeting thischallenge.

The Guidelines 1976 to 2010The OECD Guidelines are a multilaterallyendorsed, government-backed set o normative

standards that aim to promote responsiblebusiness conduct among corporations basedor operating in adhering countries.3 In eect,this means these country governments have

signed up on behal o all MNEs based

Introduction: A golden opportunity

10 Years On


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within their borders to uphold the provisionso the Guidelines. Although the originalversion o the Guidelines dates to 1976, thespeciic instance mechanism or addressingconcerns about company compliance withthe Guidelines was only opened up to non-governmental organisations (NGOs) in 2000 aspart o a comprehensive revision process. In this

complaint mechanism, National Contact Points(NCPs), the governmental bodies charged withpromoting adherence to the Guidelines andhandling complaints about speciic instanceso alleged corporate misconduct, should oertheir good oices to mediate among theparties to a complaint and, ideally, acilitate amutually-agreed resolution to the conlict. I thisis not possible, NCPs are instructed to issue ainal statement detailing the acts o the case andoering recommendations to improve adherenceto the Guidelines.

Since 2000, NGOs rom around the world haveused the Guidelines speciic instance mechanismin the expectation that government involvementin corporate-community disputes would not onlyhelp resolve the problems communities andworkers are aced with when corporate conductis poor, but also clearly state the standardsexpected o corporations wherever they

operate. NGOs wanted to test the eectivenesso the Guidelines and the readiness o OECDgovernments to curb corporate abuses.

OECD Watch, a global network o more than 80NGOs rom 45 dierent countries promotingcorporate accountability, has monitored theimplementation and eectiveness o the OECDGuidelines over the past ten years. In its 2005

Five Years On report, OECD Watch took stock

o experiences and achievements. Now, ten yearson, and on the threshold o another revision, itis timely to assess successes and ailures andanalyse the overall eectiveness o the Guidelinesso that lessons drawn can inorm the negotiations.

The 2010-2011 review o the OECD Guidelinesprovides an essential opportunity to incorporateglobal developments in corporate accountabilityand to learn rom the experience o the globalinancial crisis. This is an opportunity to revise theGuidelines by implementing real improvementsto enhance the instruments eectiveness,particularly that o the speciic instance

mechanism, in promoting responsible businessconduct.

Outline o the reportThis report assesses the contribution o theOECD Guidelines to responsible businessconduct, sustainable development, and theresolution and reduction o conlicts betweencompanies and communities regarding socialissues, environmental concerns, and humanrights. In light o the 2010 revision, OECDWatch will make continuous contributions tothe review o the Guidelines. Forthcomingpublications will thereore provide concrete andspeciic recommendations or strengtheningthe eectiveness o the Guidelines, includingprocedural improvements.

This report is intended to make a constructivecontribution to the review through acomprehensive, evidence-based, qualitative

and quantitative analysis o the past 10 years oimplementation o the Guidelines. It ocuses onthe experiences with the current (2000) versiono the Guidelines which or the irst time set upa complaints procedure that NGOs could use. Itprovides a selected case-by-case analysis o boththe shortcomings and successes o the Guidelines.The report identiies the limitations o theGuidelines and the unctionality o NCPs in light oglobal developments in corporate accountability

and the complaints raised by project aectedcommunities. It also acknowledges the positivecontribution o selected speciic instances.

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The report responds to three central questions:

1. What evidence exists that the OECD

Guidelines have had a positive impact on the

global conduct o MNEs based in adhering

countries?

The voluntary nature o the OECD Guidelineshas resulted in adhering governments being

reluctant to monitor company compliance. Whilesome inormation exists regarding companiesuse o and reerence to the Guidelines4, suchinormation says little about the speciic addedvalue o the OECD Guidelines vis--vis othersets o CSR standards, nor does it provide anyevidence as to whether the OECD Guidelineshave been ully integrated into business policiesand practices that have resulted in improvementson the ground. This report examines the positiveelements o a number o concrete OECDGuidelines cases to evaluate the potential positiveimpact and constructively inorm the reviewprocess.

2. What aspects o (ir)responsible business

conduct have not been addressed through

the OECD Guidelines speciic instance

procedure, and why not?

There are a variety o reasons that aectedcommunities, indigenous peoples, workers,

unions, and NGOs may choose not to use theOECD Guidelines speciic instance mechanism toaddress their concerns. These include:

the limited scope o the Guidelines, particularlyin relation to supply chain and human rightsresponsibilities;

lack o conidence in the complaint mechanismand NCPs;

the high cost (in terms o inancial resources

and time) o iling a complaint; no ollow-up or monitoring o

recommendations; no consequences or penalties or serious and

repeated breaches;

This report will assess which critical elements oresponsible business conduct are let uncoveredby the Guidelines and the reasons why NGOshave oten been unable to use the OECDGuidelines to address certain issues.

3. How successul have NCPs been in resolving

conlicts between communities and

corporations that have been brought to

their attention?

This question is crucial to appreciating thepotential added value o the OECD Guidelinesover the plethora o codes, guidelines andprinciples or CSR. In the speciic instancemechanism, the Guidelines possess a uniqueeature that provides the means to actively attendto and potentially resolve conlicts betweenaggrieved communities and companies. Thisreport will address the successes and ailureso the speciic instance procedure based onstatistical evidence and a number o selected casestudies that exempliy the critical issues aced byNGOs and their constituencies.

In order to answer these questions, the reportpresents a comprehensive qualitative andquantitative analysis o NGO experiences withthe Guidelines. The analysis draws rom the vastbody o experience and knowledge that has been

documented in the OECD Watch case databaseas well as on case studies and in-depth interviewswith representatives o communities aected bycorporate misconduct, NGOs involved in speciicinstances, unions, businesses, and NCPs.

As the analysis below makes clear, to datethe OECD Guidelines have had a poor trackrecord in dealing with the social, environmentaland economic problems that matter most to

communities and workers whose rights havebeen harmed by the actions o MNEs. FromOECD Watchs analysis the main impedimentsto the Guidelines being an eective instrumentconcern the conusion about their voluntary

10 Years On


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nature, their restrictive scope as well as ailingswith the implementation procedures and the lacko authority o most NCPs.

Yet, the OECD Guidelines, with their uniquecombination o internationally-agreed normativestandards, and government oversight, have thepotential to make a signiicant contribution to

improving business conduct. I that potential is tobe realised, then it is imperative that there shouldbe genuine improvements to both substance andprocedure so that the Guidelines become morethan a set o voluntary recommendations.

10 Years On


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Since the speciic instance dispute resolutionmechanism was established in 2000, OECDWatch has documented and kept track ocases iled by NGOs at NCPs around theworld in its case database.5 The aim is to helpNGOs, NCPs, unions, businesses, and otherstakeholders learn rom the experiences otheir colleagues and counterparts, to critically

monitor the eectiveness o the speciic instancemechanism in resolving disputes and grievances,and to compare and contrast NCPs handlingo cases. The database contains all relevant,non-conidential inormation about the cases,including the complaint, case developments,supporting documents, letters and statements,and ollow-up measures. It serves as a richsource o inormation or a statistical analysis thatprovides greater insight into how the complaintprocedure has worked in practice.

Nearly 100 NGO cases iledFrom the irst case iled in 2001 through to June2010, a total o 96 cases have been iled byNGOs6, making an average o approximately10 NGO cases per year. The chronologicaldistribution o cases, however, shows large annualvariance, ranging rom 4 cases in the irst yearater the 2000 revision to a high point o 21 casesin 2004, ollowed by a dramatic decrease in cases

in subsequent years.

The relatively small number o cases 96 iledby NGOs, 117 iled by unions, or a total oonly 213 cases in nearly 10 years is unlikely tobe an indication o corporate compliance withthe Guidelines, but rather a lack o conidencein the speciic instance procedure. Indeed, arecent analysis o cases o human rights abuseby UK companies showed that in many o

those cases using the NCP procedure toaddress the problem was judged a poorinvestment o resources given weakness oenorcement capacity and other proceduralweaknesses.7

Most common type o casesWith regard to the type o violations beingalleged by NGO complainants, most common(ound in 84% o all cases) is a claim o a breach othe General Policies rom the OECD Guidelines(Chapter II), which includes provisions on humanrights, sustainable development, and the supplychain. In act, nearly hal (49%) o all NGO casesallege that a company violated the human rightso those aected by their operations. Also underChapter II, 36% o cases allege that a companyailed to contribute to achieving sustainabledevelopment, another 36% allege that a companysought exemptions to laws or regulations or wasimproperly involved in local politics, 26% allegeimproper or inadequate engagement with localcommunities, and 17% allege that a company

ailed to suiciently encourage compliance withthe Guidelines among business partners in itssupply chain. These percentages add up to morethan 100% because most cases comprise multiplebreaches o the Guidelines provisions.

Other breaches that have requently been thesubject o NGO cases include environmentalviolations (53% o cases), violations o labourrights (33% o cases), ailure to disclose relevant

inormation (32% o cases), and bribery andcorruption (21% o cases). Also interesting to noteis that the Science and Technology provision is theonly Guidelines chapter that has never been thesubject o a case.

The acts: Statistics rom the OECD Watchcase database

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Chronological distribution o cases fled by NGOs,2001-2010

Numberofcases

4 8 12 21 9 11 11 10 7 3

Source: OECD Watch case database (www.oecdwatch.org/cases)

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Uneven distribution o casesamong NCPsThe 96 cases iled by NGOs as o June 2010 havebeen unevenly distributed over the 41 existingNCPs8, with approximately hal (23) o all NCPshaving received one or more NGO cases and hal(17) having never handled a case. The 17 NCPsthat have never received an NGO case include

several in eastern Europe (Slovenia, Romania,Hungary, Poland, and the Czech and Slovakrepublics), three in southern Europe (Greece,Spain and Portugal), two in northern Europe(Luxembourg and Iceland), the Baltic states oLithuania, Latvia and Estonia, the Middle Easternand North Arican countries (Israel, Turkey, andthe recently-ormed Egyptian NCP), and thenewly-ormed Peruvian NCP.

O the 23 NCPs that have received NGO cases,only seven NCPs have received more than ivecases: The UK NCP has, ar and away, receivedthe most NGO cases (23), ollowed by Germany(15), then Belgium and the US (13 each), theNetherlands (12), Norway (8), and Canada (7).

In terms o geographic distribution, the OECDGuidelines are clearly being put to use beyondthe borders o adhering countries. The vast

majority o cases lodged by NGOs (72%) concernan alleged breach o the Guidelines in a (non-adhering) developing country. Another 16% oNGO cases involve an alleged violation in anOECD country, and a urther 12% relate to abreach in a non-OECD adhering country.

Most common case outcomesThe average duration o an OECD Guidelinescase iled by an NGO is just over two years (24.32months), with some cases going on or morethan seven years (85 months). Although thereare no comprehensive statistics available, one

NGO cases by violation, 2001-2010

General Policies (human rights, supply chain) (ChapterII)

Environment (ChapterV)

Employment and Industrial Relations (ChapterIV)

Disclosure (ChapterIII)

Combating Bribery (ChapterVI)

Concepts and Principles (ChapterI)

Competition (ChapterIX)

Taxation (ChapterX)

Consumer Interests (ChapterVII)

Science and Technology (ChapterVIII)

79

50

31

30

20

18

9

7

6

0

Source: OECD Watch case database (www.oecdwatch.org/cases). Note: the number o cases led at the various NCPs adds up to morethan the total number o cases led because some cases are led at multiple NCPs.


UK

Germany

Belgium, US

Netherlands

Norway

Canada

France, Italy

Argentina, Autstralia, Brazil, Korea, Sweden

Austria, Chile, Finland, Ireland, Switzerland

Denmark, Japan, Mexico, New Zealand

23

15

13

12

8

7

5

4

3

1

NCP

Number o NGO cases received, by NCP, 2001-2010

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NGO recently estimated that the total inancialcost o their average-length OECD Guidelinesspeciic instance approximated 100,000,including personnel costs, travel, research anddocumentation. Given the time and resourcesthat must be put into researching, dratingand iling an OECD Guidelines complaint, it isdisheartening that the most likely outcome o

a case iled by an NGO is outright rejection bythe NCP.

A ull 31% o NGO cases have been rejectedcompared to only 27% o cases being acceptedand concluded with a mediated settlement orinal statement.9 A urther 23% remains pendingor iled as o June 2010, 7% was withdrawn,6% was closed without resolution, and 6% wasblocked by the NCP.

As OECD Watch has documented over the yearsin its annual NCP reviews, NCP handling ospeciic instances has been erratic, unpredictableand largely ineectual. An examination o theseven abovementioned NCPs that have handled

more than ive NGO cases is illustrative. Althoughar rom having a perect record, the UK NCPis somewhat o a positive example, havingconcluded 35% o its 23 NGO cases with amediated agreement or a inal statement. Norway

has concluded 25% o its eight speciic instances,and stands out or never having rejected a case.The Dutch NCP has also concluded 25% o its 12cases with a inal statement, while the CanadianNCP has concluded only 14% o its seven cases.The German NCP has rejected a remarkable 60%o the 15 cases NGOs have iled and concludedonly 20%, and the Belgian NCP has rejected or

blocked 54% o cases and concluded only 15%.Finally, the US NCP is a unique example, havingnever resolved or concluded a single NGO case,leaving many cases blocked or rejected.10

The most common reasons given by NCPsor rejecting NGO cases include the lack oan investment nexus (i.e. an investment-likerelationship) between the company against whichthe complaint was iled and the company or entitythat actually committed the alleged violation,e.g. a supplier, and the existence o parallelproceedings, legal or otherwise, dealing with thesame or a similar issue as that raised in the OECDGuidelines complaint. NCPs have rejected orblocked 21 o the 33 NGO cases (64%) in whichthe investment nexus has been in question and16 o the 38 cases (42%) involving parallel (legal)proceedings.11

Trade union case statistics

Trade unions have raised 11712 cases sincethe 2000 review o the Guidelines. The annualaverage or the number o cases currently standsat 11.6. The majority o cases to date concernbreaches o the Guidelines in adhering countries,although recent trends show an increase in thenumber o cases rom non-adhering countries in 2007 and 2008 the number o cases rom non-adhering countries exceeded those in adheringcountries. Trade unions have raised cases with

just over hal the number o NCPs with the largestnumber o cases having been submitted to theUSA, UK, Korea, Brazil and the Netherlands. Themajority o cases cite Chapter IV Employment andIndustrial Relations, although trade union cases

32% Rejected

27% Concluded 17% Pending

8%Withdrawn

6% Blocked

6% Filed

4% Closed

NGO cases by status, as o June 2010


10 Years On 11


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have also raised breaches relating to Chapters II,III, V, VI and VII. Trade unions have not submittedcases under the Chapters covering Science andTechnology, Competition or Taxation. WithinChapter IV, article 1.a) the right to be representedby a trade union is the most requent basis orthe case.13

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Over the past decade NGO complaints havecovered a wide range o problems in manydierent sectors. In this chapter various sectorso business conduct and business relations thathave been the subject o NGO complaints areurther highlighted and assessed. These tellingexperiences explain why NGO attempts to usethe procedures have so oten been unsuccessul

and why, despite the claims o many OECDgovernments, the governance gaps broughtabout by globalization and lax internationalregulation o business persist.

Extractive industriesThe extractive industry is regarded as a high-risk industry and the prevailing challenges inthis sector are maniold. Without adherenceto human rights standards, mining can causeloss o land and livelihoods, degradation o thenatural environment, and increased violence andconlict by security orces and regimes and rebelgroups in weak governance zones. The mostmarginalised members o communities such aswomen, children and indigenous peoples tendto both be excluded rom the economic beneitso mining and to bear the brunt o any negativesocial and environmental impacts.14

Adhering countries (as well as China) are

importing vast quantities o coltan, copper,bauxite, iron ore, uranium and gold rom mineralrich countries. Many raw materials are sourcedrom developing countries, including conlictor weak governance zones, through complexmulti-layered supply chains, including tradersand intermediaries. The growth o or exampleAustralian investment in Aricas minerals andpetroleum resources sector has been signiicant.According to Australias Minister or Foreign

Aairs there are now over 300 Australiancompanies active across Arica, with currentand prospective investment estimated atapproximately US$20 billion.15

Some o the most serious human rights abuses,including those related to corporations occur inconlict zones.16 Doing business in conlict andpost-conlict zones signiicantly increases thelikelihood o real or complicit violation o humanrights. This is urther exacerbated by the presenceo heavy handed security personnel andmilitia. The likelihood o company involvement

(even unknowingly) in bribery and corruption inconlict zones is signiicant. Revenue transparencyis critical, including the ull disclosure o allpayments (taxation, royalties, licence eesand other payments) to host governments,contractors, and intermediaries on a country-by-country basis is necessary. The ull disclosure omining licence terms, concessions and taxationarrangements and beneits will mitigate the riskso complicity in corrupt practices.17

Given this context, it is not surprising that 41 othe 96 NGO complaints have dealt with issues inthe mining, oil and gas industry. A urther 10 caseshave involved the inance sector, predominantlythrough their provision o loans and inancialservices to the extractives sector.

Experiences rom the ield

10 Years On 13


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In2002,UnidNionspnlofexs on theIllegal Exploitation o

Natural Resources and

Other Forms o Wealth o

the Democratic Republic

o Congo18 listed over 80

oreign companies as beingimplicated in the armed

conlict, illicit trading in

minerals and human rights

violations. The UN Panel

accused about 50 compa-

nies rom OECD countries

o breaching the Guidelines.

The publication o the list

caused uproar and more

than anything drew inter-national attention to the

existence o the Guidelines.

Most OECD governments

initially reused to investi-

gate the UNs allegations

and, in the ace o their

inaction, NGOs such as the

British NGO, RAID, started

to ile complaints, many o

which were rejected out-

right or simply ignored.19

In 2004, the irst o the

Congolese cases was con-sidered by the Dutch NCP,

who rejected the complaint

against the coltan importer

Chemie Pharmacie Holland

(CPH) because there was

no investment nexus [see

Critical issues (i) below]. The

Belgian, British, Canadian,

Finnish, French, German

and US NCPs ollowed suitand there was a whole-

sale dismissal o all UN

allegations against OECD

companies.

howvin2006,insons to mounting indig-nation in the British media

and pressure rom Members

o Parliament, the process

started to be taken more

seriously. In 2008 a com-

plaint involving DAS Air that

RAID had iled years earlier

was re-opened. Despite theact that the company had

by then gone into adminis-

tration, the UK NCP issued

a strongly worded inal

statement concluding that

DAS Air had breached the

human rights provision and

had ailed to undertake due

diligence with regard to its

supply chain. The DAS Airdecision set an important

precedent: it demonstrated

that when there is suicient

political will the Guidelines

TheUN,conflictand

theCongos

naturalresources

14 10YsOn


15/62

can be used to hold a com-

pany publicly to account or

activities that exacerbateconlict and contribute to

human rights violations.

tciiclissusisdbyUNpnlwith regardto the role o companies

during the Congolese wars,

which OECD governments

proved unwilling or inca-

pable o addressing, had aproound and lasting impact

on the business and human

rights debates at both the

OECD and the UN. The

OECDs Risk Awareness

Tool was the irst attempt

by an inter-governmental

body to provide guidance

to companies operating in

situations o conlict or weak

governance. The issue o

companies in conlict zones

is one o Proessor Ruggiespriorities. In 2008 evidence

collected by another group

o UN experts and NGOs

such as Global Witness

showed that many o the

same individuals and com-

panies accused o breach-

ing the OECD Guidelines

in 2002 had continued to

be involved in the mineralstrade in the Eastern DRC

and thereby were support-

ing Congolese army oicers

and commanders o rebel

groups responsible or mass

rape and other gross human

rights violations. This has

prompted the OECD in

2010 to undertake a new

project (Due diligence in

the mining and mineralssector20) to assess and

develop practical ideas or

due diligence or responsi-

ble supply chain manage-

ment o minerals rom con-

lict-aected and high-risk

areas. The results o the

project will eed into the

revision o the Guidelines

supply chain provision. l

Unil

imilndfiublic

invsigionshvbn

cidou,hunnswd

qusionswillconinuocs

hishdowovhDrCsfuu

ndcoociviisin

hcouny.

RAIDUnanswered

Questions2004

10YsOn 15


16/62

Finance sectorThe responsibility o the inancial sector in relationto the OECD Guidelines has become increasinglyapparent in recent years. At issue is the role anddegree o inluence o public and private inancialinstitutions in their choice o clients and theprojects that they und. NGOs have addressedthe responsibilities o inancial institutions and

banks through their investments, lending practicesand project inancing in controversial projects inapproximately ten cases. For example, Australiasmining sector expansion into the countrieso Arica is made possible with the assistanceo inancial institutions. Private sector banks,superannuation and pension unds, export creditagencies and multilateral inancial institutionssupport extractive investments through loans andthe provision o inancial services.

However, the application o the OECD Guidelinesto the inancial sector has been an area o muchdebate, not least amongst the NCPs themselves.Most cases iled by NGOs have been rejectedby NCPs, using the investment-nexus argument(see case box Financial facilitation of destructiveforestry in Papua new Guinea), or have not beentaken up seriously at all, such as the cases againstthe Belgian banks or their role in the inancing othe Baku-Tbilisi-Ceyhan (BTC) oil pipeline.

In recent years however, constructive discussionwithin the Investment Committee and betweenNCPs suggests an increasing number o NCPssee no sound reason to exclude the inance sectorrom consideration under the OECD Guidelines.OECD Watch has actively contributed to thesediscussions including a submission to the 2007OECD Corporate Responsibility Roundtable,and a urther submission to the Investment

Committee in preparation or its Working Partymeetings in March 2009 on the application o theOECD Guidelines to the inancial sector. Bothsubmissions articulated practical criteria or NCPsin assessing the sphere o inluence and business

conduct o inancial institutions. They are availableon the OECD Watch website.21

In 2006, the Swedish and Norwegian NCPsaccepted a complaint against the bank Nordea orits inancial involvement in Botnias controversialpulp mill in Uruguay. Whilst rejecting the case in2008 or not having ound indications to support

the complaints, it is stated that this assessmentwas based on the procedural guidance prescribedby the OECD Guidelines, and on the view thatthese could also apply to inancial institutions withreerence to Chapter 2:10.22

I there is one lesson to be taken rom the recentglobal economic crisis, it is that banks exercisesigniicant leverage over business ability tooperate. I inancing and credit dry up, the abilityo business to unction becomes compromisedand potential economic beneits are not realised.Much in the same way as individual consumers arenow beholden to the stricter terms and conditionsbanks require to do business, inancial institutionscan, and do, exercise inluence over business.Issues o responsible business conduct applyequally to the inancial sector via their businessdecisions and operations. Financial institutionsmust thereore ensure their due diligence goesbeyond iscal imperatives, particularly when

unding large inrastructure projects in developingcountries, conlict zones and when there is a likelyimpact on communities including on women andindigenous peoples.

I the OECD Guidelines are to be considered acredible, legitimate and enorceable standardo business behaviour, greater conormity andcoherence in the assessment o admissibility byNCPs o speciic instances involving inancial

institutions are needed. For the OECD Guidelinesto be relevant today, they must take into accountand relect the complex and ever-changing natureo enterprises, including the critical roles banksplay in their ability to do business.

1 10 Years On


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In2006, a group oAustralian and Papua

New Guinea (PNG) NGOs

lodged a complaint against

the Australian and New

Zealand Banking Group

(ANZ Bank), because the

bank provided guarantees

and other inancial servicesto Rimbunan Hijau or its

operations in PNG. They

argued ANZ Banks inancial

support o a logging com-

pany that ails to promote

sustainable development,

respect human rights or

exercise sound environmen-

tal management, meant

the bank had also violatedthe OECD Guidelines. ANZ

Bank countered that its

provision o inancial serv-

ices did not constitute an

investment, and that

it had no inluence over

Rimbunan Hijaus activities.

InOcob2006, theAustralian NCP rejected

the complaint or lack o

an investment nexus while

also oering to inaugu-

rate a dialogue betweenthe groups. The NCP was

unable to reach a irm

conclusion on the extent

o ANZs inluence over

Rimbunan Hijau, and did

not investigate that ques-

tion independently. Despite

the rejection o the com-

plaint, pressure by NGOs

on the bank to articulateclear sustainability standards

continued.

ANZ Bank became the irst

Australian bank to adopt

a ormal orestry and bio-

diversity policy in 2007,

developed in consultation

with civil society groups and

industry. Among others, this

policy includes clear com-

mitments to not support

illegal orestry or large-scale

conversion. And ANZs

CEO has publicly criticisedRimbunan Hijau, even as

the bank continues actively

to urge Rimbunan Hijau to

improve its operations.

InOcob2008, the PNGSupreme Court ound that

Rimbunan Hijaus mas-

sive orestry concession at

Kamula Doso was illegallyobtained, thus substanti-

ating primary arguments

advanced in the ANZ

complaint. l

Financialfacilitationof

destructiveforestry

inPapuaNewGuinea

NGOs

gudhaNZBnksfinncilsuo

ofloggingcomnyh

filsoomosusinbl

dvlomn,schumn

ighsoxcissound

nvionmnlmngmn

mnhbnkhdlso

violdhOeCD

Guidlins.

10YsOn 17


18/62

Manuacturing IndustriesLabour intensive manuacturing, in particular oconsumer goods like garments and electronics,is or a large part outsourced to low-incomecountries. It has been well-documented thatworking conditions in actories supplying orOECD based brands are oten a key area oconcern. Prevailing issues in the manuacturing

industry include: low wages, long working hours,lack o reedom o association, unhealthy andunsae working conditions, discrimination andharassment, and insecurity o employment(migrant and precarious work). NGOs have,sometimes in coalition with trade unions, iledmany cases against MNEs or labour rightsviolations in their production chain. In general,NCPs seem to expect more responsibility obrand companies in the manuacturing industrycompared to the supply chains o extractivesindustries, as is shown by the number o acceptedcomplaints compared to other sectors. In generalNCPs, notably the Dutch NCP23, have interpretedthe supply chain provision in a broader way, alsotaking into account supplier relationships inmanuacturing industries.

The area o debate in this sector has thereore notocused on the admissibility o the complaints,but rather on the actual ability o the NCP to

contribute to a resolution between the partiesconcerned, in particular when it concernssuppliers and local organisations that mustultimately be part o the solution. While acceptingcases, NCPs have still struggled with the questionwhat can be expected rom buyers in terms ousing their leverage to ensure better workingconditions in supplier actories. As a result, NCPswere largely unable to act as drivers or changeor make a meaningul contribution to better

supply chain management, transparency andindependent veriication o compliance to theGuidelines provisions throughout the supplychains o consumer goods.

NCPs have thus ar not proven to provide a veryuseul additional mechanism or the resolutiono conlicts, in particularly concerning thesesectors (such as the garment industry) wherecampaign organisations have been addressingbrand responsibilities or many years, througha wide range o instruments, including publiccampaigning, as well as negotiations with

companies regarding the (independent)monitoring and veriication o their codes oconduct.

The cases iled by various sections o the CleanClothes Campaign (see case box Labour rights inthe garment industry), provide telling exampleso the challenges aced by NGOs in using theOECD Guidelines to improve working conditionsin garment actories. The lack o tangible resultsin improving working conditions has let the CCCand their local partners highly disappointed in theOECD Guidelines complaint mechanism.

NGOs and unions typically expend signiicanttime and resources investigating and developinga complaint. Many o them, recognising theweakness o the Guidelines speciic instanceprocess and the non-uniorm way NCPs handlecases, do not see the value in iling complaints.Indeed, it is hardly surprising NGOs see more

possibility or change and solutions by activelycampaigning or taking legal action. But asis evidenced by the recent case iled againstTriumph in December 2009 with support o theSwiss CCC, some NGOs are still willing to seekthe good oices o NCPs to resolve labour rightsviolations even when past cases could havebeen handled better. More would do so i NCPsunctioned consistently and in accordance withminimum procedures where, i mediation ails, the

NCP makes a determination on whether or notthe OECD Guidelines have been breached.

1 10 Years On


19/62

Indvloingcounis,actory workers who make

clothing and sportswear or

brand name companies that

sell their apparel in Western

markets repeatedly have

their labour rights violated.

They are requently deniedreedom o association,

paid low wages, labour or

long hours without overtime

pay, work in hazardous

conditions, and ace harass-

ment and discrimination. I

reedom o association is

even allowed, many actory

owners overtly or covertly

engage in union busting.

Ovlsnys,NGOs have iled a number

o complaints against

Western garment and

ootwear companies,

which buy rom suppliers

that violate labour rights.

For example, in 2001, the

India Committee o the

Netherlands submitted a

case against Adidas ater it

was discovered that their

ootballs were being pro-duced by children in India.24

In2002,ausinClnClosCmign (CCC)submitted complaints

against Adidas and Nike

because their Indonesian

suppliers were carrying out

an aggressive campaign o

intimidation to discourage

workers rom organising

and to suppress demands

or a living wage and decent

working conditions. The

complaint against Adidas

was transerred to the

German NCP, and urther

handled by the German sec-

tion o the CCC. The Nike

case was rejected by the US

NCP.25

In2006,InnionlScifoCCCandthe India Committee o the

Netherlands submitted a

complaint against G-Star,

because Indian NGOs and

unions had documented

dozens o labour rights

violations by the companysIndian supplier. In an outra-

geous move, the supplier

took legal action to silence

the Indian NGOs and unions

ater they, working with

the CCC, initially tried to

engage in a direct dialogue

with the companies.

Incofcss,thecompanies categorically

denied the speciic allega-

tions o rights violations

in their supply chains.

During the handling o the

complaints, a lot o time

and resources was spent

questioning the evidence

and producing counter evi-

dence. The NCPs struggled

with conlicting inormation

thwok

innsiyof[foobll]

sichingchildnishigh.a

6-y-oldonlywokingchild

sndsonvg7.5hous

sichingbllswhil13-yold

childsnds9hous.

ExcerptfromtheIndia

CommitteeoftheNetherlands

2001complaintagainst

Adidas.

10YsOn 19


20/62

rom the parties, and were

reluctant to determine

whether the Western com-

panies had actually violated

the Guidelines. Rather than

actively trying to igure out

the acts on the ground and

solve the problems with

the involvement o local

stakeholders and aected

workers, the NCPs mostly

took a low hanging ruitapproach, and ocused on

whether the companies

had suicient supply chain

and labour rights policies

in place, thereby shiting

the ocus away rom the

victims perspective. In the

case against G-Star in the

Netherlands, the company

never ormally accepted amediation process, and the

NCP was unable to bring

the parties together beore

urther escalation.

Onosiivno, theNCPs handling the two

Adidas and the G-Star

cases did not reject the

complaints or lack o an

investment nexus. The cases

were clearly dealing with

the companies suppliers,

and the NCPs accepted

them, conirming that

companies in this sector

do have responsibility to

ensure their merchandise ismade in actories with good

labour conditions. The spe-

ciic instance process also

allowed or new levels o

engagement and dialogue

in two o the cases.

howv,in the experienceo the CCC these our cases

illustrate signiicant short-comings in the Guidelines

speciic instance procedure:

they illustrate that media-

tion is diicult, because o a

lack o mutual trust between

the parties. Furthermore,

it is not enough or a cam-

paign group and retailer

in the OECD country to

enter into dialogue. Unless

irm agreements are also

reached between work-ers or unions and their

employers in the producing

countries there is unlikely to

be any real improvements.

Unortunately, despite sev-

eral cases being handled

and several statements

being published it does

not appear that the OECD

Guidelines have made anysigniicant contribution

to ending labour rights

abuses in the global gar-

ment industry. l

Fcoyowns

hsulyNikndadids

kfullimwgsblowwh

isnddomhbsicndsof

singlwok.thismksmoswoks

dsowoksmuchovimshy

cnhnchfcoyownisblofill

nwodsquickly,whnvhycomin.th

ssufomximumflxibiliyndminimum

cos

lsomksincssyfofcoyowns

ovnhgowhofcivunions,which

mighsooducionoskoincs

wgcoss.26

ExcerptfromtheCleanClothes

Campaign2002complaint

againstAdidasandNike.

20 10YsOn


21/62

The bright side: Positive outcomeso OECD Guidelines cases

Despite the act that the case statistics andcase experiences drawn rom the OECDWatch case database show that the currentGuidelines mechanism has many weaknesses,several positive outcomes can also be reported.Determining the degree to which the OECDGuidelines have positively inluenced the globalconduct and behaviour o MNEs based in

adhering countries is a complex task, especiallygiven the diiculty in attributing causality inthe convoluted arena o regulatory rameworks,societal and governmental expectations, andCSR initiatives aimed at inluencing businessvalues and behaviour, not to mention thesubjective nature o the notion o positiveand the act that views o what is positive otendier among stakeholders and even withinstakeholder groups.

Undoubtedly, part o the positive impact o theOECD Guidelines is tacit. The Guidelines havebecome one o the key global benchmarks o CSR,and they undeniably inluence and deine whatgovernment expects o business. The Guidelineshave had ripple eects on other CSR processesand instruments such as the Global Compactand ISO 26000. Proessor Ruggie has requentlyreerenced the OECD Guidelines throughout hismandate and in his Protect, Respect, Remedy

ramework, or example. Furthermore, there isevidence that the Guidelines are inluencingsocially responsible investors and inancialinstitutions.

On a more concrete level, while some inormationexists regarding individual companies useo and reerence to the Guidelines27, suchinormation says little about the speciic addedvalue o the OECD Guidelines vis--vis other

sets o CSR standards, nor does it provide anyevidence as to whether the OECD Guidelineshave been ully integrated into business policiesand practices or i they result in improvements onthe ground.

In a recent article published in the journal PublicAdministration, researchers at Bocconi Universityin Milan, Italy, ound that while corporatebehaviour is unlikely to change simply as aresult o the existence o the OECD Guidelines,the Guidelines sot sanctioning power has thepotential to alter corporate behaviour in the longrunifthe Guidelines ability to consistently

discriminate between good and bad perormersis improved. 28 This means that the Guidelinesspeciic instance grievance mechanism iswhere their unique added value lies and is a keydeterminant o the positive impact that they canhave. It makes sense then, to assess the positiveimpact o the OECD Guidelines by evaluating thedegree to which OECD Guidelines cases havecontributed to some orm o remedy or resolutionor the victims o corporate abuse, a behaviouralchange within the company, or improvements inthe environmental and human rights conditionson the ground.

Mediated agreements, NCP statements,and (some) improved behaviourThe most logical place to begin the search orpositive elements is with cases that have resultedin an NCP-mediated or acilitated agreementbetween the complainant and the company. Areview o the 96 cases iled by NGOs reveals that,

although this type o outcome is unortunatelyrare, there have certainly been some notableagreements. For example, as early as June2001, just one year ater the speciic instancemechanism was opened to NGOs, the Dutch NCPmediated an agreement between Adidas andthe India Committee o the Netherlands on theneed or company codes o conduct to be basedon international standards and to be activelymonitored. In a case iled the same year by Oxam

Canada, RAID, et al. against the Canadian miningcompany First Quantum Mining (see case box Nofollow-up Zambian copper mine agreements), anagreement was reached to remove the threat oorcible evictions rom mining areas in Zambia and

10 Years On 21


22/62

to negotiate a phased resettlement programmeor settlers. In more recent years, cases againstGSL and BHP Billiton (both handled by theAustralian NCP) and Accor Services (handled bythe Argentine NCP) led to agreements betweenthe parties. In all these instances, the OECDGuidelines mechanism undoubtedly contributedto mediated outcomes.

While a resolution o the issues raised througha mutually accepted agreement is the idealoutcome o an OECD Guidelines case, experienceshows that governments reluctance to attachconsequences to a companys reusal to participatein the speciic instance process30 means that anagreement is the exception rather than the rule.However, even i an agreement is not possible, anNCP statement that acknowledges the validityand legitimacy o the complainants concerns,determines whether the Guidelines were actuallybreached, and provides recommendations tothe company on how it can better implementand uphold the Guidelines can be seen as apositive outcome. The government-backedweight attached to the OECD Guidelines providesauthority to NCP statements and the importanceo an NCP publicly inding companies to havebeen in breach o the Guidelines should not beunderestimated. In addition, a strong and clear

NCP statement can contribute to a better commonunderstanding o how business is expected tobehave and provide useul recommendations orimproving the implementation and eectivenesso the Guidelines. Recent statements by the UKNCP in cases against Vedanta and Arimex andby the Norwegian NCP in a case against AkerKvrner have done just that.

Despite approximately 25% (26 cases) o the

speciic instances iled by NGOs being concludedwith an NCP-mediated agreement or inalstatement, it is telling that only a handul31 ocases have actually led to improved corporatebehaviour and/or improvements on the

ground. Those cases that can count a changeo behaviour among their positive elementsinclude a case against GSL in which, as a resulto an agreement acilitated by the AustralianNCP, the company improved its perormance onhuman rights (related to detention centres orunderage immigrants in Australia); a case againstBayer in which the German company accepted

responsibility or child labour in its cottonseedsupply chain and took action to improve thesituation; and a recent case against AccorServices, in which the Argentine NCP acilitatedan agreement that saw the company contributeinancially to help improve its perormance ontransparency and bribery/corruption.

Positive indirect impacts andprocedural elementsEven in instances where there is no agreement,settlement, or immediate improvement inthe situation, the OECD Guidelines cases cansometimes have an indirect positive eect. Insome cases, the mere act that a complaint exists,can prompt a resolution o the case in anotherorum. In a case lodged by Germanwatch againstContinental, or example, although there was noagreement within the speciic instance processor even a inal statement by either the Mexican orthe German NCP, the complaint attracted media

attention and eventually members o the Germanparliament helped to settle the case. A Guidelinescomplaint can generate media attention, raiseawareness, and lead to increased public pressureon companies to improve their behaviour. It is alsoa means o alerting governments about the issuesat stake. For example, although a case raised bythe Australian Conservation Foundation againstANZ Bank was rejected by the Australian NCP,the case resulted in a review o the applicability

o the Guidelines to the inancial sector, and ANZbecame the irst Australian bank to develop aorestry and biodiversity policy (see case boxFinancial facilitation of destructive forestry inPapua New Guinea).

22 10 Years On


23/62

In a number o cases an NCP has taken aprocedural decision that, i generally adopted,could greatly enhance the eectiveness othe Guidelines. In a case against DAS Air, orexample, the UK NCP conirmed that publicdetermination o a breach o the Guidelines is alegitimate role or an NCP. And in a case againstthe Scandinavian bank Nordea, the Swedish and

Norwegian NCPs conirmed that the Guidelinesdo apply to the inancial sector, a position thatwas previously not accepted by all NCPs. Anotherpositive procedural development has beenthe willingness o the Dutch NCP to travel andconduct in-country act-inding and mediationwith the parties; an example o this is the ShellPandacan case in the Philippines. Victims ocorporate misconduct in developing countriesoten lack the inancial resources to travel tomeet the NCP in person. The eectiveness othe mechanism can be greatly improved i NCPsare able to go and meet them and conduct localmediation.

The caveatsIn contrast to the improvements and positiveoutcomes observed in this handul o cases,the vast majority31 o OECD Guidelines caseshave unortunately not led to any signiicantimprovement in the respective companys

behaviour or the situation that led to thecomplaint. Indeed, many o the cases with apositive element have had some underlyingweakness or limitation. For example, in theFirst Quantum Mining Zambian case (seecase box No follow-up Zambian copper mineagreements), the Canadian NCP was successulin mediating a negotiated agreement to stopthe violent eviction o people arming on mineland and increase communication between the

company and local communities. However, theNCP did not monitor implementation o theagreement. Subsequent research ound thatMopani Mines had not honoured the agreement,the aected communities were being displaced

and the company breaches o Guidelines werecontinuing.33 This case highlights how importantit is or NCPs to monitor and ollow-up on inalstatements and agreements; the act that thisrarely happens is one o the major weaknesses incurrent OECD Guidelines procedures.

Table 1 (pages 26-29) provides a compilation

o the positive elements o the cases raised byNGOs but it also notes less welcome aspects thathave weakened or even undermined the outcome(caveats). It should be noted that this list is notexhaustive and that there may be other cases inwhich one or more parties elt that the case had apositive outcome.

While the complaint mechanism continues to beused by aected communities, workers, NGOsand unions, the limited number and quality opositive elements in OECD Guidelines caseshas undermined the reputation o the OECDGuidelines complaint procedure over the years.Although some limited reorms have occurred asa result o NGO and trade union pressure, thesehave not been widespread enough to overcomethe view among many inluential internationalNGOs that using the OECD Guidelines is a time-consuming, resource-intensive process that, evenin the best case scenario, results in only minor

improvements.

In the next three chapters, the report ocuses onthree key critical issues that OECD Watch wouldlike to see addressed in the revision o the OECDGuidelines. These critical issues are related tosupply chain and trade relations, human rightsand the environment.

10 Years On 23


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Title Date fled Issue

Survival International vs. Vedanta Resourcesplc

19 Dec 2008 Human rights

H. Recalde and H.W. Jore vs. Accor Service 28 Nov 2007 Bribery & Corruption

Colombian communities vs. BHP BillitonandXstrata

26 June 2007 Human rights

Global Witness vs. Arimex 20 February 2007 Human rights

ACF et al. vs. ANZ Bank 24 August 2006 Environment, humanrights

CEDHA and Bellona vs. Nordea 28 June 2006 Financial sector,Environment

Fenceline Community and FoE NL vs. RoyalDutch Shell

15 May 2006 Disclosure, Commu-nity engagement

ForUM vs. Aker Kvrner ASA 20 June 2005 Human rights

Human Rights Council o Australia et al. vs.

GSL

15 June 2005 Human rights

Table 1:Overview o positive elements with caveats o cases fled by NGOs, 2001-2010

24 10 Years On


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Positive element Caveat

Strong statement rom UK NCP conrmed al-leged breaches. NCP included element o moni-toring by asking parties to provide a ollow-upreport three months ater the nal statement.

No change in corporate behaviour in policy orpractice. Complainants attempt to ollow up onlocal situation was met with physical threats andvandalism.

Successul mediation by Argentine NCP resultedin negotiated settlement. Accor agreed to make anancial contribution to Transparency Internation-al Argentina or its anti-corruption programme.

NCP has not ollowed up or monitored imple-mentation o the agreement.

The case contributed to an agreement betweenCerrejn Coal and the township o Tabaco that

included contributions to indemnities o US$1.8million and a urther US$1.3 million or sustain-able projects. In addition, the case has prompteda pilot company-based grievance mechanismto be put in place as part o UN SRSG Ruggiesramework.

A similar agreement was not reached or ourother aected communities. NCP has not ol-

lowed up or monitored implementation o theagreement.

Strong statement rom UK NCP conrmed al-leged breaches.

No change in corporate behaviour on the ground.NCP has not ollowed up or monitored imple-mentation o the recommendations in the state-ment.

Although the case was rejected by the AustralianNCP, the case resulted in a review o the appli-cability o the Guidelines to the nancial sector,and ANZ subsequently developed a orestry andbiodiversity policy.

The Australian NCP applied a restrictive inter-pretation o the investment nexus to reject thecase.

Swedish & Norwegian NCPs conrmed that theGuidelines should apply to nancial sector andaccepted the case against Nordea bank.

Although the NCPs did accept the case, theyeventually ruled that the Guidelines had not beenbreached. No change in company behaviour.

Dutch NCP conducted eld visits and local actnding to investigate allegations. Although Shellreused to engage in NCP-led mediation, the

company subsequently initiated an independ-ent risk assessment o its operations and invitedsome local residents and stakeholders to partici-pate.

The NCP accepted Shells unreasonable conden-tiality requirements and ailed to get the partiesto the mediation table. A large group o local

citizens and community leaders questioned theindependence o Shells initiative. The ques-tions were directly posed to Shell, but the com-pany declined to respond.

A strong statement rom the Norwegian NCPconrmed alleged breaches, and the companyceased the activities in question. The case gener-ated broad public debate in Norway, and demon-strated that an OECD Guidelines complaint canaect a companys reputation.

The company claimed its cessation o activitieswas not a result o the OECD Guidelines case, buta simple business decision.

Australian NCP-acilitated mediation resulted in

a negotiated agreement. The Australian HumanRights Commission determined that conditions indetention centres had improved since the case.GSL remained open to direct consultation withthe complainants.

It is not known i agreements reached with GSL

carried through to subsequent detention centremanagers. The NCP did not monitor implementa-tion o the agreement.

10 Years On 2


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Title Date fled Issue

Germanwatch, CBG and Global March againstChild Labour vs. Bayer

11 October 2004 Child labour

RAID vs. Das Air 28 June 2004 Human rights

FoE Netherlands and Ecoceanos vs. Nutreco 22 August 2002 Environment

Germanwatch vs. Continental AG 27 May 2002 Labour rights

Oxam Canada, RAID et al. vs. First QuantumMiningand Glencore

16 July 2001 Human rights

ICN vs. Adidas Netherlands 20 June 2001 Labour rights

2 10 Years On


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Positive element Caveat

During the course o the case, Bayer accepted itsresponsibility or child labour which it had previ-ously neglected. Bayer set up a programme orchild care or its cottonseed production in India

The process o the case was not optimal as theGerman NCP accepted Bayers reusal to negoti-ate with one o the complainants, which resultedin parallel talks and no joint mediation meetings.The NGOs later questioned Bayers claims o howmuch child labour had been reduced.

A strong statement rom the UK NCP conrmedalleged breaches and criticized the company orailing to undertake due diligence with regard toits supply chain. One important procedural ele-ment o this case is that the UK NCP conrmed

that determination o whether or not a breach othe Guidelines has occurred is part o an NCPstask in handling specic instances. In addition, thecase drew attention to the role o transporters,which, under a strict interpretation o the invest-ment nexus would have been considered bymany NCPs to be outside their remit.

Lengthy delays by the UK NCP in acting on thecomplaint meant that DAS Air had ceased itsactivities long beore the case was concluded.The main source o pressure on DAS Air was aban imposed by the EU on the grounds o saety,

which meant the company was not allowed to fyits planes in the EU region. As a result DAS Airwas in administration by the time the nal state-ment was issued.

The Chilean NCP acilitated an agreementbetween the local (Chilean) company and thelocal NGO involved.

Most o the issues o the complaint were notdealt with, FoE Netherlands was excluded romthe agreement, and no agreement was reachedat the headquarters level with the Netherlands-

based parent company.

Although the case was never ofcially concluded,the fling o the complaint attracted mediaattention and eventually led to a number oparliamentarians getting involved in the case.The situation in the actory improved as anew investor was ound and a solution wasnegotiated, which resulted in the co-ownership othe actory by the workers.

The NCP process itsel was unhelpul in resolvingthe issue. No agreement was reached, nor was afnal statement issued by neither the Mexican northe German NCP.

The Canadian NCP was successul in mediatinga negotiated agreement to stop abuses on the

ground and increase communication between thecompany and local communities.

The NCP did not monitor implementation o theagreement. Follow up research by a third party

several years later indicated that the companyhad breached every aspect o the agreement,that the situation on the ground remainedextremely problematic, and that the companycontinued to violate the Guidelines.

The Dutch NCP was successul in mediatingan agreement between the parties on theneed or company codes o conduct based oninternational standards and monitoring o thecodes.

NCP unable to gather its own inormation onAdidas practices and unable to monitor itsown agreement (ironic given the emphasis onmonitoring in the agreement).

10 Years On 2


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Incomlinfildin2007, Transparency Internationals

national chapter in Germany

(TI-G) argued that 57

German medical, manu-

acturing and transport

companies had violated

the Guidelines when they

allegedly paid US$ 11.9 mil-

lion in kickbacks to obtain

contracts as part o the UN

Oil-or-Food programme

in Iraq. The complaint drewon substantial evidence

rom a UN report published

in 2005 that named 2,253

companies which allegedly

made a total o $1.8 billion

in illicit payments.

tIGmnygud that thealleged corrupt and illicit

payments marked a clearand large-scale breach o

the OECD Guidelines anti-

bribery provisions (Chapter

VI). It asked the NCP to

ascertain whether, in view

o the evidence presented

in the Volcker report, the

named corporations had

subsequently introduced

appropriate precaution-

ary measures as recom-

mended in the Guidelines

to prevent any likelihood o

such breaches occurring in

the uture.

howv,tI-Gscomlin

against 57 German compa-nies ailed to be considered

due to lack o an investment

nexus. The German NCP

rejected the case on techni-

cal grounds. It claimed that

the German companies

had been involved in trad-

ing with Iraq and that trade

lay outside the Guidelines

remit.

tI-Gmininsthat theauthoritative evidence pro-

vided in the Volcker report

should have been more

than suicient to justiy an

examination by the NCP

as to whether a breach

o the Guidelines had

occurred. TI-G argued that

Alleged breaches by such a

large number o companies

cannot be ignored without

undermining the credibility

o the Guidelines.

Wiisssssmn o theinadmissibility o the Oil-

or-Food complaint, theGerman NCP conirmed its

reputation or applying a

restrictive interpretation o

the Guidelines.

In a letter to the Ministry oEconomics, which housesGermanys NCP, the chap-terTI-G rejected the NCPsarguments. It asked the

minister to reconsider thecomplaints dismissal andto reinorce the Guidelinesapplicability to all businessactivities.l

UNOil-for-FoodscandalinIraq

tI-Ggud

hallgd

bchsbysuchlg

numbofcomnis

cnnobignodwihou

undmininghcdibiliy

ofhGuidlins.

28 10YsOn


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Critical issues or the review (i):Supply chains and trade relations

The previous chapter showed that in some casesNCPs sought to issue useul recommendationsto guide corporate behaviour, and that in a ewcases these recommendations resulted directly orindirectly in positive changes in a companysbehaviour. However, the overwhelming majorityo cases were rejected, blocked or otherwise con-cluded without meaningul resolution. What are

the implications o these ailures and will the revi-sions be suicient to enable the OECD Guidelinesto deal with the challenges o the 21st century?

International business has undergone ar-reaching structural and organisational changesas it has grown larger and more complex.Through international business transactions andglobal production networks, the boundarieso enterprises tend to blur, oten as a result othe outsourcing o manuacturing and otherbusiness processes. Trade in goods and servicesconstitutes the biggest single sector o the globaleconomy and it will continue to grow unabatedas new players rom all over the world enter themarket. As a rule, multinational corporationsengage in production, services and trade.

Many o the adverse consequences o corporateactivities that aect workers and communitiesoccur urther down the supply and production

chains. Large multinational corporations areinluential players in global supply chains, theycan have a signiicant impact on social andenvironmental conditions throughout theseproduction and supply chains. It thus seemsentirely artiicial to expect to be able to promoteresponsible business behaviour in selected partso a corporation while excluding other partso the same supply chain rom having to meetinternationally deined standards.

When the OECD Guidelines were revised in 2000,NGOs pushed to include supply chain responsi-bility in the list o essential recommendations tobe included. They considered it imperative that

the OECD Guidelines should address all businessconduct and the responsibilities arising through-out the whole production and supply chain. Aterintense debate, a paragraph was included thatencouraged multinational enterprises to promoteresponsible business conduct with their businesspartners, sub-contractors and suppliers.

However, the wording o this provision remainedvague. Moreover, the irst NGO complaintsdealing with supply chain issues provokedan intense debate about the scope o theGuidelines. This resulted in a clariication by theInvestment Committee (then called Committeeon Investment and Multinational Enterprises) in2003, which introduced the new term investmentnexus. It imposed the view that the Guidelinesapply only to investments or investment-likerelationships. This position was justiied on thegrounds that the OECD Guidelines were part othe Declaration on International Investment.

In tune with the spirit o deregulation o the pastdecade, the investment nexus came to be usedby many NCPs to beat an unprecedented retreatin relation to the business activities that theGuidelines apply to. Ultimately, the investmentnexus was interpreted by some NCPs as anobligation to reject all complaints related to

business transactions such as trade and inance: inshort, everything but direct investment.

While there are some variations in the way NCPsinterpret the supply chain provision, and someNCPs continue to apply the original, broader in-terpretation o the 2000 version, there is no doubtthat the investment nexus has been used to re-duce signiicantly the scope o the Guidelines andhas thereore dramatically limited their useulness.

Cases related to value chains andtrade relationsAs a result o the ever-increasing trend towardsoutsourcing o business activities to countries

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with a high risk o breaches o OECD Guidelinesprovisions, it is not surprising that many o thecases raised by NGOs relate to an MNEs supplychain and other business relationships. In total,33 (more than one third o all NGO cases) relateto a companys supply chain. O these 33 cases,21 (64%) have been rejected by the NCP orwithdrawn without resolution. Only 10 (30%) have

been accepted and concluded within the NCPprocess. In other words, more than two thirds o allcases that have attempted to address an allegedviolation in an MNEs supply chain have beenrejected, while less than one third have even beendealt with by an NCP.

The OECD Watch case database conirms thatthe OECD Guidelines have been used by NGOsin a wide range o sectors and areas o businessactivity, including manuacturing, extractives,inance sector, and trade. The characteristicso the business relationships and supply chainstructures between these sectors vary widely, andso do the challenges aced by NGOs seekingto use the OECD Guidelines in their work in aparticular sector.

Too many NCPs have systematically reused todeal with any breaches that relate to trade orsupply chain issues, without examining the type o

relationships and the level o inluence a companymay have over its business partners. This positionis illustrated by the German NCPs rejection o theOil-or-Food corruption case. In October 2005,the Volcker report had concluded that some 2,000irms, 57 o which were German corporations,linked to the UN oil-or-ood programme in Iraq,had been involved in bribes and surcharges to theIraqi government. (see case box UNOil-for-Foodscandal in Iraq).33

A company that engages in bribery in order toobtain a contract and or an exemption romcomplying with international and nationalstandards is in ull control when it resorts to such

an illicit method, irrespective o the nature o itsbusiness, e.g. sales in goods, services, or directinvestment. There is no justiication to be drawnrom the substantive text o the Guidelinesand most certainly none rom normal businesspractice to ree multinational corporations romtaking ull responsibility or whatever undesirableeects their trade in goods and services might

and sometimes do produce.

By ailing to use the Guidelines to examineserious allegations such as bribery in the supplychain, the governments not only underminethe integrity o the procedures but also deny acompany that may have been wrongly accused othe opportunity o clearing its name.

Deining the scopeThe poor record on coverage o supply chainand trade relations has made OECD Watch callor a broad application o the OECD Guidelinesto investments and business relationships ormany years now. The narrowing o the OECDGuidelines to exclude trade was a manoeuvreto limit their scope despite the gains thathad been made in the review in 2000. Theclear reerences in the text to both trade andinvestment were ignored. The investment nexusarose out o political expediency rather than a air

interpretation o the text as can demonstratedby the attempts by some NCPs to designateactivities deined in trade and investmentagreements as investment so as to avoidhaving to take up the cases.

Deining the exact scope o the supply chainresponsibility will always be subject to debateand varies widely rom sector to sector. But amere case-by-case approach in assessing the

applicability o the Guidelines to supply chainscan no longer be justiied, as this has resulted ina lack o coherence amongst NCPs and arbitraryNCP decisions. Criteria or deining supplychain responsibility are being heavily debated

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in various international ora and there are bestpractices in supply chain management and multi-stakeholder initiatives that provide guidance orassessing where to draw the line and or deiningwhat is reasonable to expect rom companies interms o responsibility throughout their supplychains. O particular relevance is the concepto sphere o inluence as described in the ISO

26000 guidance on social responsibility. Whileinluence alone may not be a suicient reasonto attribute responsibility, it is clear that thegreater the inluence the more likely there isalso a responsibility to exercise that inluenceappropriately. However, the responsibility toexercise inluence positively must be linked to theexistence o a negative impact.

Drawing on and reinorcing these criteria, theOECD should provide better guidance or NCPs,businesses and NGOs as to what can be expectedrom MNEs in terms o their supply chainresponsibility. NCPs should assess whether thecompany has exercised a duty o care and tookall reasonable steps to avoid or mitigate negativeimpacts through ts supply and production chain.Recommendation II.10 and its commentary thatdeals with relations among suppliers and otherbusiness partners, and the clariication by theOECD in 2003, have an excessively narrow ocus

on the degree o inluence rather than assessingthe human rights, social and environmentalimpact o the companies.

This is a vitally important issue or the revisiono the Guidelines. The OECD will have to takeinto account the current business structures andredeine the supply chain responsibility whichshould not be based on investment relationshipsonly.34 A broader understanding o the scope

o the Guidelines is needed, accepting themas being recommendations or responsibleinternational business conduct where no artiicialdistinction between trade and investment shouldbe made.

The update should incorporate the results oProessor Ruggies work in clariying supply chainresponsibility. He has ocused on the real andpotential human rights impact o a companysactions and the due diligence that is expectedo them. The scope o responsibility is deinedby the actual and potential human rights impactsgenerated through a companys own business

activities and through its relationships withother parties, such as business partners, entitiesin its value chain, other non-State actors andState agents. The components o due diligenceaccording to Proessor Ruggie compromise theollowing: A commitment to human rights setout in a company policy statement, periodichuman rights assessment o the real andpotential impacts o company activities andthose o business partners and the supply chain,establishing relevant controls and managementsystems to monitor the company human rightspolicy, and reporting.35

The issues o sphere o inluence, impact andcorporate complicity in violations that runthroughout production networks, and via sub-contractors and agents, remain contested byboth business and some NCPs. However, thereis now global recognition that the objectives osustainable development, equitable economic

prosperity and responsible business conduct canonly be achieved i implemented throughout allaspects o the business, and particularly in highrisk sectors and zones with conlict, post-conlictor weak governance.

The examples in previous chapters showthat arguably some o the most undamentaldimensions o responsible business conduct havebeen ruled out o consideration under the OECD

Guidelines because o the arbitrary approach tothe investment nexus.

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accodingoUNpnlo Experts on the Illegal

Exploitation o Natural

Resources and Other Forms

o Wealth o the Democratic

Republic o the Congo,

Avient Air was contracted

to organize bombing raids

into eastern DRC in 1999

and 2000.36 Avient provided

planes, attack helicopters

and Ukrainian crews to the

Congolese Air Force andthe Zimbabwean Deence

Force. The evidence col-

lected suggests that Avient

dropped hand made uel

bombs rom the back o

Antonov Cargo planes. This

indiscriminate bombing

lead to the loss o civilian

lie in Equateur. The com-

pany denied that Avientorganised bombing raids.

But it admitted that Avient

leased aircrats to the

Zimbabwean Government

or use in the DRC. Avient

also admitted that it had

provided engineering,

training and crews or the

Congolese Army.

tscondllgionconcerned the provision

o military supplies to both

the Congolese Army and

the Zimbabwean Deence

Force. In particular, the

UN accused Avient ohaving brokered the sale

o six attack helicopters

to the DRC government

in April 2002.37 Avient

denied this but admitted

shipping military cargo on

behal o the Zimbabwean

Government in 1999. The

company argued that since

none o the military hard-ware had been exported

out o the EU, Avient was

not in breach o the Arms

Embargo.

In2003, ater the UNSecurity Council had called

or a ull investigation o

these allegations, the case

was reerred to the UK NCP.

The NCP reused to admit

RAID as complainants in the

process and nor was any

investigation conducted.

The NCP issued a inal

statement in September

2004 essentially recording

Avients response to the

allegations and eectively

exonerating the company.

This took place despite theact that the NCP had a let-

ter rom the DRC Air Force

in its possession which clear-

ly implicated Avient in mili-

tary campaigns on behal o

the DRC government. The

statement only reminded

the company to careully

consider its uture conduct

in relation to human rights.No ollow-up or monitor-

ing o Avients subsequent

behaviour has been per-

ormed by the NCP. l

Indiscriminate

bombingintheDRC

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Critical issues or the review (ii): Human rights

In 2000 the inclusion o a general human rightsprovision into the revised text o the Guidelinesmarked a small but signiicant breakthrough.Only workplace and some labour rights hadbeen included in the previous texts. It predateddevelopments at the United Nations in Genevawhere in 2004, ater years o discussion andconsultation, the Commission o Human Rights

had called or a study into the human rightsobligations o corporations, O course, given thatthe OECD Guidelines operate through the actionso home or host governments, its human rightsprovisions do not undamentally challenge thereceived notion that international human rightslaw is applicable only to States. Corporations arehowever increasingly recognized as participantsat the international level, with the capacity tobear some rights and duties under internationallaw. Distinguished legal experts consider thatthis makes it more diicult to maintain that theyshould be exempt rom responsibility in otherareas o international law.38

The human rights recommendations o theOECD Guidelines are not grouped into a singlechapter o the Guidelines. The overarching humanrights provision is very short and is containedin the General Policies Chapter paragraph 2,which states that companies should respect

the human rights o those aected by theiractivities consistent with the host governmentsinternational obligations and commitments. Butmany paragraphs in dierent chapters containhuman rights provisions, especially provisions onlabour rights in Chapter 4.

The unwillingness o most NCPs to address gravehuman rights abuses, coupled with the act thatew NCPs had human rights training, has been

a major obstacle in the implementation o theGuidelines. Many NCPs reused to examineinormation about alleged human rights abuses,however serious, or to conduct their own act-inding, claiming that the Guidelines were

uture-ocused and not intended to act as aninstrument o sanction nor to hold any companyto account.39 The case o Avient Air concerningits alleged involvement in bombing raids in theDemocratic Republic o Congo (DRC) illustratesthis approach (see case box Indiscriminatebombing in the DRC). The negligent way in whichthis and other cases that occurred in the DRC

were handled by the NCP, provoked outrageamong British Members o Parliament and thepublic who then joined orces to demand acomplete overhaul o the procedures.

In 2005, Proessor John Ruggie was appointedSpecial Representative on Business and HumanRights. His initial mandate40 was to identiy andclariy human rights standards o corporateresponsibility and accountability or business.He examined the Guidelines and the unctioningo the NCPs and has subsequently made anumber o recommendations about how theymight be strengthened. Proessor Ruggie hasencouraged NCPs to consider how they mightapply the principles he has identiied or eectivenon-judicial grievance mechanisms.41 They arelegitimacy, accessibility, predictability, equitabilityor the parties involved, transparency, andcompatibility with internationally recognisedhuman rights.42

There is no doubt that under basic principles ointernational law, States have the duty to takemeasures to prevent, investigate, and punishabuses by private actors and to provide a meansto redress harm done to victims. Due to limitedcapacity or lack o political will, governmentsoten ail in these regards. While the State may notexercise its jurisdiction overseas, it is not barredrom exercising jurisdiction in its own territory in

respect o acts committed abroad.

Proessor Ruggie considers NCPs to be apotentially important vehicle or providingremedy, even i, with a ew exceptions,

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Documents

10 años de las Directrices de la OCDE