# Written Comment of Arvind Ganesan Director, Business and Human Rights Human Rights Watch

Department of State Bureau of Economic, Energy, and Business Affairs

US Department of State

November 3, 2010**1** 

## Concerning the Administration’s Review of the US National Contact Point for
the OECD Guidelines for Multinational Enterprises

I. Introduction

The Organization for Economic C ooperation and Development (OECD) Guidelines for Multinational Enterprises (“Guidelines”) sets out norms of responsible social behavior by multinational firms and empowers a “National Contact Point” (NCP) in each country to receive, respond, and take action on complaints under these standards. The United States National Contact Point is part of the Bureau of Economic, Energy, and Business Affairs. This Huma n Rights Watch comment examines the role of
the United States National Contact Point unde r the Guidelines and offers recommendations for strengthening the role and action of the US NCP.

In a 128-page report released in September 2010, Human Rights Watch recounted several cases of European multinational firms violating workers’ freedom of association in their US operations. 1 Most companies scrutinized in the report proclaim public ly their commitment to the OECD Guidelines and
to the core labor standards of the International Labor Organization (ILO), the principles of the United Nations Global Compact, the Universal Declarat ion of Human Rights, and other international
instruments that call on multinatio nal enterprises to respect workers’ rights. We found, however, that when workers with grievances turned to the US NCP for redress, their complaints were unavailing. This comment reflects further Human Ri ghts Watch research into these and other cases
that have come before the US NCP in recent years.

The OECD Guidelines are a potentially powerful force for promoting “high road” investment strategies for global business. But the US NC P has been a passive actor on this important international stage. In contrast to counterparts in other countries, the US NCP has missed many opportunities to hold multinational companies ac countable for meeting the OECD’s human rights, environmental, labor, and other social responsibility benchmarks.

This comment calls on the administration and Cong ress to strengthen the role of the US NCP and make it an active, robust voice for a “best practi ces” agenda in international economic and social policy.

1 Human Rights Watch, A Strange Case: Violations of Workers’ Freedom of Associ ation in the United States by European Multinational Corporations, September 2010, http://www.hrw.o rg/en/news/2010/09/01/us-eur opean-corporate-hypocrisy.**2** 

### The OECD Guidelines for Multinational Enterprises

The OECD first adopted its Guidelines for Multinational Enterprises in 1976 and last revised the Guidelines in 2000. A mix of events in the 1970 s prompted the OECD to create the Guidelines:

• Revelations in 1975 Senate hearings of Am erican-based ITT Corp.’s payments to coup plotters in Chile (leading to the Pinochet military dictatorship) and other corporate wrongdoing put pressure on the United States and other “home country” OECD governments to halt abuses by their multinational firms in “host country” nations. 2

• Trade unions were concerned about many mu ltinational companies’ interference with workers’ organizing rights and practice of th reatening “runaway shops” (as they were then called—the term “outsourcing” is more commo n now) to force down wages and working conditions in collective bargaining contexts. 3

• The United Nations was considering proposal s from developing countries to put new conditions on foreign direct investment in the name of a “new international economic order,” an initiative fiercely resisted by OECD countries and multinational companies. 4

The OECD saw a voluntary set of Guidelines as a way to pre-empt stronger action. The OECD Guidelines call on foreign-investing companies to ac t responsibly with respect to human rights; the environment; consumer protection; science and te chnology; antitrust, taxation, and employment law; and industrial relations.



### Guidelines on Employment and Industrial Relations

Chapter IV of the OECD Guidelines covers labor concerns. First, companies should honor the core labor standards of the International Labor Organiza tion (ILO): respecting workers’ organizing and bargaining rights, halting child labor and forced labor, and ensuring non-discrimination in the workplace. Beyond the ILO core standards, the Guid elines call for information and consultation with

2 United States Senate, Senate Foreign Relati ons Committee, “Multinational Corporations and United Stat es Foreign Policy: Hearing s before the Subcommittee on Multinational Corporations of the Sena te Committee on Foreign Relations” (the “Church Committee”), 9 4th Cong., 1st sess., 381-86 (1975).

3 Richard J. Barnet and Ronald E. Müller, Global Reach: The Power of the Multinational Corporation (New York: Simon & Schuster, 1974).

4 Adeoye Akinsanya and Arthur Davies, “The Third World Ques t for a New International Economic Order: An Overview,” The International and Comparative Law Quarterly , Vol. 33, January 1984, p. 208.**3** workers’ representatives, safe and healthy jobs, ad vance notice of workplace closures and efforts to mitigate their effects, refraining from outsourcing threats in contract negotiations, and other good
faith measures in labor relations.



### The Guidelines’ Complaint Mechanism

The OECD Guidelines are a classic “soft law” in ternational mechanism that does not contemplate binding decisions and remedies. The first clause bluntly states:

The Guidelines are recommendations jointly addressed by governments to multinational enterprises. They provide pr inciples and standards of good practice consistent with applicable laws. Observance of the Guidelines by enterprises is voluntary and not legally enforceable.

Trade unions and civil society groups can file complaints claiming corpor ate violations of the Guidelines, but in keeping with the “soft” approa ch, they should not call them “complaints.” They must style them as “enquiries” in “specific inst ances” seeking “clarification” of the Guidelines. Although it is no longer the case, for many year s the OECD prohibited “enquiries” from even naming the corporations whose conduct gave rise to them.

A complaint that proceeds through the whole process ends with a clarification from the Investment Committee (formerly the Committee on Internationa l Investment and Multinational Enterprises, CIME). The OECD carefully commands that “The Committee shall not reach conclusions on the conduct of individual enterprises.”



### The Role of National Contact Points

The Guidelines’ procedures give wide latitude to NCPs on how to handle complaints. NCPs
“contribute to the resolution of issues that aris e relating to implementation of the Guidelines in specific instances.” They “offer a forum for discussion ... to deal with the issues raised.” They “offer good offices to help the parties involved to resolve the issues.”

NCPs may “facilitate access to consensual and no n-adversarial means, such as conciliation or mediation, to assist in dealing with the issues .” Finally, if the parties involved do not reach agreement, NCPs can “issue a statement, and make recommendations as appropriate, on the implementation of the Guidelines” (see Appendix A).**4** 

### Importance of Final Statements

This last point is critical, because an impending NCP “final statement” and its recommendations can push contending parties to resolve their disputes, even without binding legal force. Final statements typically recount events leading to the complaint, positions of the parties, actions of the NCP, and
recommendations or final outcomes of the case. By assessing companies’ performance under the Guidelines, NCP final statements hold global firm s accountable for their behavior. Final statements are also a self-reporting mechanism holding NCPs themselves accountable for their actions.

Within these parameters, several NCPs are acti ve, catalytic agents triggering a dynamic of engagement and exchange between complaining pa rties and companies to resolve their disputes and foster compliance with the Guidelines. Many NCPs work closely with civil society advocacy groups, as well as with labor and business grou ps. They take pains to issue detailed final statements on what gave rise to complaints and cases and what they did in response to them.

The UK National Contact Point, for example, has is sued a final statement in every concluded case it has handled in the past decade. A Steering Board with five government and four civil society representatives oversees and monitors the NCP’ s performance. The UK NCP also can engage independent mediators to investigate complaints and make recommendations. 5 The UK NCP
maintains a website with detailed information abou t its actions, including minutes of Steering Board meetings. 6

Section IV below describes the work of the UK and other proactive NCPs in greater detail.



### II. Passive Voice: The US National Contact Point

In contrast to results-achieving counterparts in some other countries, the United States NCP has maintained a passive stance on complain ts and cases under the OECD Guidelines.

5 An external mediator appointed by the UK NCP held a series of meetings in 2008 between compla ining trade unions and the global firm Group 4 Securicor. The mediator’s recommendations led to a succe ssful voluntary resolution of the dispute. See the Trade Union Advisory Committee’s “Analysis of Trade Union Cases Raised With National Contact Points February 2001-May 2009,” available from TUAC.

6 Minutes are archived at http://www.berr.gov.uk/whatwedo/sect ors/lowcarbon/cr-sd-wp/nationalcontactpoint/page45873.html.**5** 

### Parallel Proceedings and Investment Nexus

Nearly all US NCP cases have arisen under the Gui delines’ chapter on employment and industrial relations. The US NCP often gives one of tw o grounds for inaction. One invokes “parallel proceedings.” If a complaint under the Guidelines is also before the National Labor Relations Board or on appeal to the courts, the NCP declines to pursue it. But nothing in the Guidelines – which are voluntary and non-binding, in any event – requires such inaction. To the contrary, other countries’ NCPs take strong action while cases are proceeding in their domestic legal institutions. Often they contribute to resolutions so that lega l proceedings are voluntarily ended.

Another ground for inaction is “lack of investme nt nexus.” Since the OECD adopted the Guidelines to promote responsible behavior by multinational corporations in their foreign-invested projects, complaints should be related to cross-border in vestment relationships. But this “nexus” can be narrowly or broadly construed to reach or not reach, for example, abuses by supply chain firms (who are often bound by the multinational’s code of conduc t), or by firms that rely on loans from overseas banks. The US NCP typically says that the investment nexus is insufficient and refuses to act, while other NCPs are more ready to take up such cases.



### OECD Data on US NCP Performance

At the June 2009 annual meeting of NCPs in Paris, the OECD Secretariat issued a report on NCP
cases since the last revision of the Guidelines in 2000. 7 For the United States in 2000-2008, the report found:

• 21 complaints received by US NCP (17 on labo r issues; two on human rights abuses in Congo mining operations with American investment, and two on human rights abuses related to seaborne arms trafficking);

• Five cases ongoing (“ongoing” is a misleading classification since these cases date back to 2006 at the latest, and nothing is happening on them);

• 16 cases concluded;

7 Organization for Economic Cooperation and Development, Annual M eeting of the National Contact Po ints for the OECD Guidelines f or Multinational Enterprises, “Draft Report by the Chair of the 2009 Annual Meeting,” DAF/INV/NCP(2002)1, May 29, 2009.**6** • 15 concluded cases with no final statement; and

• One concluded case with a final statement.



### Results for Other Countries

Belgium

In contrast to the US NCP’s record, the NCP of Belg ium received 12 complaints in the same period. Of these, three are ongoing. Of the remaining nine concluded cases, the Belgian NCP issued final statements in eight of them. Thus, the NCP of Belg ium has an 89 percent “final statement rate” in handling complaints under the Guidelines.

France

France’s NCP received nine complaints, three of wh ich are ongoing. In the remaining six cases, the NCP issued a final statement in four of them, a 67 percent final statement rate.

Netherlands

The Netherlands’ NCP received 23 complaints in the 2000-2008 period. Of these, six cases are pending. The NCP issued final statements in six co ncluded cases, a 35 percent final statement rate. But in five other cases, the Du tch NCP worked with a counterpar t in another country whose NCP issued a final statement, meaning that the Dutch NCP’s final statement “involvement” rate was 65 percent.

United Kingdom

In Britain, the NCP handled 15 complaints. Of thes e, four are ongoing and three are “suspended.” In all of the eight concluded cases the UK NCP issued final statements, a 100 percent final statement rate. Moreover, in all of the ongo ing cases and in two of the three suspended cases, the NCP made public written “initial assessments” giving details of the cases. In sum, in 14 out of 15 cases, the UK NCP has gone on record with a written final statement.**7** Here is a summary grid on final statement information:



### III. US NCP Case Studies

This section reviews a sample of cases submitted to the US National Contact Point in the past
decade. 8 As indicated in the above chart, the US NCP did not issue a final statement in any of these cases save one. The next section will compare ot her NCPs’ handling of complaints and cases.



### Trico Marine

The International Transport Workers Federation (I TF) and a coalition of AFL-CIO unions filed a complaint to the US NCP in February 2001 allegi ng Trico Marine Services was engaging in an aggressive anti-union campaign against Louisian a-based workers who supply offshore oil drilling platforms in the Gulf of Mexico. Trico employed workers in Norway, Brazil, and other countries performing the same jobs. The unions believed that Trico’s actions ran afoul of the OECD Guidelines clause calling on multinational firms to respect workers’ organizing rights.

Trico’s actions gave rise to charges before the US National Labor Relations Board and to a lawsuit in Norway, where Norwegian workers sought court per mission under Norwegian law to boycott Trico’s North Sea operations. The US NCP cited these “para llel proceedings” as grounds to do no more than

8 These case summaries draw on the Trade Union Advisory Committee’s Analysis of Trade Union Cases Raised With National Contact Points February 2001-May 2009 , available from TUAC, as well as information in the 2009 Chair’s Report. Country #Cases #Ongoing #Concluded #Final Statements

Belgium 12 3 9 8

France 9 3 6 4

Netherlands 23 6 17 6

UK 15 7 8 8

USA 21 5 16 1**8** forward the unions’ complaint to the company and forward the company’s reply back to the union. The company and the union ultimately settled the legal case in Norway before trial.



### Liberia Ship Registry

In November 2001 the International Transport Work ers Federation (ITF) filed a complaint against the Liberian International Ship and Corporate Regist ry, a US-registered compan y, alleging Registry complicity in arms trafficking to the Liberian go vernment. The ITF said that the Registry’s actions violated OECD Guidelines on transparency and on co mbating bribery. Six months later, the NCP said it would not act because the United Nations was taking up the matter. 9



### US mining companies in DRC

In 2002 and 2004 Friends of the Earth and the Br itish NGO Rights & Accountability in Development (RAID) filed complaints with the US NCP alleging that US mining companies were complicit in human rights abuses in the Democratic Republic of the Congo. Despite documentary evidence that US firms were exporting minerals from a conflict zone rife with human rights violations, the NCP refused to accept the complaints. It argued that a separa te inquiry by the United Nations precluded NCP
action. 10



### Saint-Gobain

In June 2003 the chemical and energy global unio n ICEM, together with the AFL-CIO and the United Auto Workers (UAW), filed a complaint with the US NCP alleging interference with workers’ organizing efforts at a Massachusetts factory owne d by the French firm Saint-Gobain. The unions made repeated requests to the NCP to “offer good offices,” in the words of the Guidelines’ implementation clause, to bring the part ies together to find a resolution.

Workers ultimately voted against union representa tion in January 2005 in an election process marked by a fierce anti-union campaign by Sa int-Gobain management. Two years later, the NCP issued the only Final Statement on record in any case it has handled since 2000. The final statement consists of a one-page document saying that in April 2005 the company rebuffed NCP offers to bring

9 United Nations Security Council, “Letter dated 26 October 2001 from the Chairman of the Security Council Committee established pursuant to resolution 1343 (2001) concerning Liberia,” S/2001/101 5, October 26, 2001, (calling for continued monitoring of all eged arms trafficking).

10 United Nations Security Council, “Letter dated 15 October 2003 from the Chairman of the Panel of Experts on the Illegal Exploi tation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo addre ssed to the Secretary-General,” S/2003/1027, October 23, 2003.**9** the parties together, and that “the USNCP took no immediate action, but indicated to both parties that it would continue monitoring developments.... ”

The NCP final statement cited an NLRB Administrat ive Law Judge’s March 2006 decision upholding the 2005 election results, but made no mention of the judge’s findings that “the company did violate labor laws” and that the election “may no t reflect an uncoerced majority of the ballots.” 11 The judge in the case allowed the election results to stand because the union had agreed to hold the election rather than wait months or years mo re to resolve unfair la bor practice charges.

The NCP final statement ends, “the USNCP decided to discontinue its monitoring of the dispute and to prepare this final report concluding its in volvement in the matter.” Union representatives
interviewed for A Strange Case said that the NCP passively acce pted the company’s “stonewalling” in the case, doing nothing to press management to be more responsive an d instead claiming to be “monitoring” the situation during the year-and-a -half that the complaint was pending at the NCP. 12



### Wackenhut

The Union Network International (UNI) filed a compla int with the US NCP and the UK NCP in August 2004 over allegedly aggressive interference with wo rkers’ organizing rights at various facilities of Wackenhut, a security services company owned by the British multinational firm Group4Securicor (G4S). Wackenhut management allegedly threat ened, spied on, and fired workers active in organizing with help from the Service Employees International Union (SEIU), a UNI affiliate. Four months later, the US NCP replied that it was still assessing whether it would even consider the case.

UNI wrote again to the US NCP in January 2005 poin ting to Paragraph 1 of th e Guidelines’ chapter on employment and industrial relations, which ca lls on global companies to respect workers’ organizing and bargaining rights. The US NCP replie d six months later, saying it was still assessing the case but pointing to “parallel proceedings” at the NLRB as grounds for non-action. The NLRB later found Wackenhut guilty of unfair labor practice s at several locations around the United States.

While the US NCP sat on its hands, the UK NCP active ly fulfilled the facilitation role called for in the Guidelines’ implementation provisions. The UK NCP carried out sustained communications and meetings with G4S and with UNI, and in January 2008 the NCP convinced them to accept mediation
and to authorize the mediator to fashion a reco mmended settlement. In December 2008, G4S and UNI signed a Global Framework Agreement reso lving their dispute and recognizing workers’

11 Decision of ALJ Arthur J. Amcham, Saint-Gobain Abrasives, Inc. and UAW , Case No. 01-CA-41623 (2006).

12 Human Rights Watch interview with former UAW representative Steve Beckman, Washingon, DC, August 5, 2009.**10** bargaining rights, while in the United States Wack enhut reached a similar agreement with unions for
its US facilities.



### Imerys Carbonates

The United Steelworkers union filed a complaint with the US NCP in September 2004 alleging antiunion actions by Imerys Carbonates, a US subsidiary of a French multinational industrial minerals firm, at its facility in Sylacauga, Alabama. The un ion asked the NCP to work with the French NCP to resolve the dispute.

The US NCP cited “parallel legal proceedings” before the NLRB as grounds for taking no action on the case. As noted above, there is no such “p arallel proceedings” constraint under the OECD Guidelines. No legal barrier stands in the way of the US NCP acting to bring parties together and help settle conflicts arising under the OECD Guidelines. The US NCP, however, failed to act in any affirmative fashion to “assist in dealing with the issues” as called for in the Guidelines’ implementation section.



### Angelica

In 2004 and 2005 the US union UNITE-HERE filed complaints with the US NCP and the Dutch NCP over conditions at facilities of Angelica Textil e Services in locations around the United States. Although it was an American company, Angelica re lied on funding from a US affiliate of the Dutch
ABN Amro Bank.

After an initial assessment the US NCP refused to consider the case. It said that the financing arrangement between Angelica and its Dutch lender was not a sufficient “investment nexus” to fall within the Guidelines, even though Paragraph four of the Guidelines’ Concepts and Principles states

The Guidelines are not aimed at introducing differences of treatment between multinational and domestic enterprises; they reflect good practice for all. Accordingly, multinational and domestic enterprises are subject to the same expectations in respect of their conduct wherever the Guidelines are relevant to both.



### Threemile Canyon Farms

The United Farm Workers union (UFW) filed a compla int in May 2005 over alleged abusive practices as Threemile Canyon Farms, a major supplier to Sorre nto Lactalis, which is a subsidiary of the French**11** multinational company Groupe Lactalis. “We mailed the complaint and got nothing back from theNCP,” said a UFW representative involved in the case. “We called and didn’t get a call back. We emailed and got no response. It was a black hole.” 13

The UFW reached an agreement with Threemile Canyon Farms later in 2005. In the OECD’s June 2009 report on NCP cases, the US NCP listed this case as “ongoing” with the note “In contact with parties; initial assessment.” The UFW representative told Human Rights Watch, however, that UFW has had no contact with the US NCP since 2005.



### Gamma Holding

The Steelworkers union filed a complaint under th e OECD Guidelines in February 2006 over developments at the National Wire Fabric facility in Star City, Arkansas. The Dutch multinational firm Gamma Holding owned the factory.

In July 2005, after months of ne gotiations on a new contract, workers had exercised their right to strike following management demands for a numb er of concessions, including elimination of seniority rights and other protections built up over many years of bargaining. Management responded by hiring permanent replacement workers and offering supervisory jobs to striking workers who would cross the picket line, bu t no striking workers took the offer.

The US NCP forwarded the union’s OE CD complaint to its Dutch counterpart four months later in June 2006, but refrained from further steps to help reso lve the dispute. The NCP cited the union’s unfair labor practice charge before the NLRB as a reason not to act. In January 2007—nearly a year after the US NCP received the union’s complaint under the Guidelines—the NLRB issued its own complaint finding merit in the union’s charge of bad-faith ba rgaining by NWF management. The Board said that “the strike was converted to an unfair labor practi ce strike on February 28, 2006,” just after the union had filed its OECD complaint with the US NCP.

The Steelworkers union repeatedly asked the US NCP to take more forthright, robust action in the case, but the NCP declined to hold the company accountable under the Guidelines. “The NCP just allowed this case to die on the vine,” said a Steelworkers union representative involved in the

case. 14 The union and the company finally settled the NLRB case in May 2007, more than a year after the union filed its OECD complaint to the US NCP. At 22 months, it was the longest strike in the history of Arkansas.

13 Human Rights Watch interview with UFW representative Eric Nicholson, Seattle, Washington, July 18, 2009.

14 E-mail to Human Rights Watch from Steelworkers representative Shawn Gilchrist, July 21, 2009 (copy on file with Human Rights W atch).**12** The US NCP did not issue a final statement in this case.



### Continental Tire

In August 2006 the United Steelworkers told the US NCP of alleged outsourcing threats by Germanowned Continental Tire to influence contract negoti ations at its plant in Charlotte, North Carolina. The union argued that such threats run counte r to paragraph 7 of the OECD Guidelines on employment and industrial relations, which specif ies that enterprises “should ... not threaten to transfer the whole or part of an operating un it ... to influence unfairly ... negotiations.”

Just weeks earlier, on June 29, 2006, the NLRB had issued its own complaint finding merit in the union’s unfair labor practice charge that management was bargaining in bad faith. This gave the US NCP a solid foundation for joint action with the Ge rman NCP to bring a resolution to the disputes. However, the US NCP pointed to NLRB proceedings and subsequent court cases as grounds not to act on the union’s complaint. An exasperated unio n representative later told Human Rights Watch,
“The NCP used the Board case as an excuse. It never convened a meeting with the company. It seemed to have no interest in doing anything.” 15

The union has since prevailed in a series of lawsuits on issues raised in the OECD complaint, most recently in June 2009. 16

In the 2009 Chair’s Report, the US NCP classifies this case as “ongoing” and notes “In contact with parties; initial assessment.” A Steelworkers represen tative told Human Rights Watch in 2009 that
there has been no contact with the US NCP on this case since 2006. 17



### VAE Nortrak

The Teamsters union filed a complaint in November 2006 for rail workers in its Maintenance of Way division alleging anti-union actions at Alabama work sites by the Nortrak subsidiary of the Austrian firm Voestapline (VAE). In 2007, empl oyees voted to decertify the union.

15 Interview with AFL-CIO representative Kenneth Zinn, Washington, DC, August 10, 2009.

16 See United Steel, Paper & Forestry, Rubber, Manuf., Energy, Allied -Indus. & Serv. Workers Int'l v. Continental Tire N. Am. Inc., 568 F. 3d 158 (4th Cir. 2009). This decision recounts earlier proceedings.

17 Human Rights Watch interview with Steelworkers representative Shawn Gilchrist, Pittsburgh, Pennsylvania, December 17, 2008.**13** In the 2009 Chair’s report, the US NCP classified the VAE Nortrak case as “ongoing” noting “In contact with parties; initial assessment.” Howeve r, a Teamsters union representative told Human Rights Watch that there has been no contact with the US NCP about the case since 2007. 18



### Delta Airlines

In September 2008 the Association of Flight Atte ndants (AFA) filed a complaint with the US NCP alleging interference with workers’ organizing e fforts by Delta Airlines. The AFA said that Delta management held captive-audience meetings and issued flyers and videos to employees denouncing the union and suggesting that employees could be worse off with union representation and collective bargaining, and argued that Delta’s actions were contrary to the Guidelines’ clause that enterprises should “respect the right of their employees” to form unions.

The US NCP refused to accept the complaint “due to lack of investment nexus” notwithstanding
Delta’s substantial investment in assets and personnel in other OECD countries.



### IV. An International Compar ison: How Other Countries’ NCPs Carry Out Their Roles

Despite the large number of complaints received over the past decade, the performance of the US NCP has failed to evolve and its practice lags be hind that of many of its EU counterparts, in particular the UK and the Dutch NC Ps. The failure of the United States to show leadership on the issue of corporate accountability in the glob al economy has had a number of undesirable consequences. By failing to take a strong stan d on responsible business conduct abroad, the US has sent the wrong signals to Asian OECD member s like Japan and South Korea who continue to shield their companies from the consequences of poor environmental and labor standards and a lack of transparency. 19

The US government’s lukewarm approach to the Guide lines has also been used as a justification by
other NCPs for their lack of action as well. But most worryingly, emerging economies like China and India, which have observer status at the OECD , have gradually stepped back from any formal

18 Human Rights Watch interview with Teamsters representa tive Robert Weiner, Washington, DC, August 7, 2009.

19 See for example, Earth Rights International and Shwe Gas Move ment, “The failure of the Korean government to hold Korean corporations accountable for violations in Burma,” July 2009. The report refers to the complaints against Daewoo and KOGAS for human rights and environmental laws violations in Burma. The complain t was rejected by the Korean NCP on November 27, 2008 and the re port explains why and how that decision was erroneous and suggests re commendations to the OECD to improve the effectiveness of the Guidelines. Earth Rights International and the Shwe Gas Movement have requested that OECD’s Investment Committee address the governance gap within the OECD Guidelines system of implementa tion by acknowledging the Korean NCP’s errors in interpretation, and by clarifying certain aspects of Guidelines with resp ect to the Korean NCP’s decision in the Shwe case.**14** commitment to responsible business conduct, thereby increasing the risk of a downward spiral of corporate behavior in the future.

The US NCP can remedy this situation if the US administration commits itself to improving the NCP structure and procedures. The Nordic NCPs, which are predominantly tripartite in structure 20 and benefit from a culture of openness, are worth studyi ng. But the most telling recent developments to
the NCP model have occurred in the UK and th e Netherlands, so we focus on these here.



### UK NCP

A number of lessons can be drawn from the UK experience.

In 2006 the British Government initiated a consulta tion on the UK NCP following growing discontent over its handling of specific cases, particularly complaints about British companies operating in the Democratic Republic of the Congo (DRC). A new st ructure was put in place in September 2007. It transformed the UK NCP from a single ministry un it located within the Department of Trade and Industry, DTI (now the Department for Business, Inno vation and Skills, BIS) to an interdepartmental body staffed by officials from DTI, the Foreign and Commonwealth Office (FCO), and the Department for International Development (DFID). 21

Since March 2009, following another slight restructuring, the UK NCP has three full-time staff persons all based in a single gove rnment department (BIS). But the most important innovation has been the creation of a Steering Board to advise and oversee the work of the UK NCP. The Board, which meets three times a year, has four external members drawn from different constituencies (business, labor, NGOs, and the UK parliament) and the same number of officials drawn from different government departments, all of which have a direct interest in the work of the NCP.

The Steering Board is chaired by a senior civil serv ant from BIS. Among the Board’s several functions
are these:

20 The Swedish, Norwegian, and Danish NCPs are all tripartite with representatives from business and the unions who act in an advi sory role. The Finnish NCP is quadripartite and includes an NGO advisor.

21 After a year, the UK NCP reverted to being staffed by three officials from BIS because of the difficulties of getting staff f rom different government departments to work jointly on complex cases for a su stained period of time. But the inter-departmental nature of t he UK NCP is maintained through participation in the Steering Board of representatives of the following government departments: Busin ess, Innovation and Skills; the Department for International Developm ent (DFID); Foreign and Commonwealth Office (FCO); the Departme nt for Works and Pensions (DWP); and the Export Credits Guarantee Depa rtment (ECGD). The Board can also call on other government departments and agencies as necessary.**15** • To increase the skills and knowledge available to the NCP by involving external (for example, non-civil servants) experts from whom the NCP may seek guidance on the interpretation of the Guidelines and complex issues arising in specific cases.

• To oversee the operations of the NCP and in ca ses of dispute, consider whether the handling of a case has been adequate and in accordance with the agreed procedures.

• To advise on the NCP’s promotional activities.

In its first year, the Steering Board radically overhauled the NCP’s procedures. It brought in clearer timeframes. It called for more thorough initial assessments, setting out the grounds on which a specific complaint has been accepted or reject ed, and made the assessments public. It further called for fully reasoned final statements, whic h, if mediation has failed, include the NCP’s
determination as to whether breaches of the Guidelines have occurred.

Given the OECD Guidelines’ emphasis on reaching an accord between the parties where possible, the UK NCP has pioneered the use of professional mediators. This approach brought successful conclusion of a case involving the global security firm Group4Securicor (G4S) and the global union federation Union Network International (UNI). 22

UNI’s complaint alleged that G4S was violating na tional laws and driving down standards in a number of different countries including Mozamb ique, Israel, Uganda, Malawi, Germany, Panama, and Uruguay, as well as in the United States th rough its Wackenhut subsidiary. The alleged failures included non-payment of entitlements, including overtime; harassment, victimization and firing of trade unionists; and a refusal to recognize unions.

In December 2008, under the auspices of the medi ation process launched by the UK NCP, G4S and UNI reached an agreement on the resolution of this case. The agreement contains the following provisions:

G4S recognises the important role that un ions play in representing employees’ interests and recognizes UN I as its global partner....

G4S is committed to being a socially resp onsible corporate citizen and will sustain its efforts to lead and inspire the industry by applying its Business Ethics policy. The

22 Based in Geneva, Switzerland, UNI was fo rmed in January 2000 as the global unio n federation for workers and unions in telecommunications, property services, banking and commerce, post al, information technology, graphical, media, and other sector s. UNI’s 900 affiliated unions represent 20 million workers in 140 countries. See websit e at www.uniglobalunion.org.**16** company will respect rights established through the core conventions of the ILO and will apply them in accordance with this agreement wherever legally possible. This includes the rights of its employees to freedom of association and to be members of trade unions, and the right of unions to be recognized for the purpose of collective bargaining. The company further agrees that it will respect the OECD Guidelines for Multinational Enterprises.... 23

The UK NCP issued a statement citing G4S’s reaffi rmation of its ongoing commitment to honor and respect national law and to respect the ILO core la bor conventions, including the rights to freedom of association and collective bargaining. 24

Other important decisions taken by the UK NCP rela te to allegations against companies operating in the Democratic Republic of the Congo (DRC). In Ju ly 2008 the UK NCP found DAS Air, a UK-based air cargo company, in breach of the human rights and supply chain provisions of the Guidelines for its part in transporting minerals from rebel-held area s of the eastern DRC. Rights & Accountability in Development (RAID), which had filed the complain t, welcomed the NCP’s decision as a major breakthrough. This was the first time a British company had been found to have breached the Guidelines for its conduct during the Congolese conflict. 25

A month later, in August 2009, the UK NCP, in response to a compla int by Global Witness, concluded that Afrimex, a minerals trading company, had also contributed to fueling conflict in the DRC, and that it failed to respect human rights and take adequate steps towards abolishing child and forced labor in its supply chain. 26 The NCP issued press releases on th ese decisions and the Afrimex final statement was translated into French and widely distributed in the DRC.

The decisions in these cases have set an important precedent. According to British NGOs and the Trades Union Congress (TUC), the DAS Air and Afrimex decisions, which emphasize the responsibilities of companies involved in trade and services in conflict zones, “have demolished the artificial barriers (“supply chain” and “investmen t nexus”) that OECD governments had erected to try to shield their companies from scrutiny and censure.” 27 John Ruggie, the Special Representative

23 See G4S and UNI, “Ethical Employment Partnership: A global agreement between UNI and G4S,” December 11, 2008.

24 UK NCP, “Final Statement by the UK Nati onal Contact Point for the OECD Guidelines for Multinationa l Enterprises: G4S and Union Network International,” 12 December 2008.

25 UK NCP, “Final Statement,” July 21, 2008. “DAS Air did not try to establish the so urce of the minerals they were transporting f rom Kigali and Entebbe, stating they were unaware of the potential for the minerals to be sourced from the conflict zone in eastern DRC. The NCP finds it difficult to accept that an airline with a signific ant presence in Africa includin g a base in Entebbe would not ha ve been aware of the conflict and the potential for the minerals to be sourced from Eastern DRC.”

26 UK NCP, “Final Statement Afrimex,” August 28, 2008.

27 Rights and Accountability in Development (RAID), The Corporat e Responsibility (CORE) Coalition, and the Trades Union Congress (TUC), “Fit for Purpose: A Review of the UK National Contact Poin t for the OECD Guidelines for Multinational Enterprises 2008”, November 2008. The authors note that the supply chain provision of the Guidelines (2.11) has been narrowly interpreted by some governments so as to**17** of the Secretary-General on business and human rights, referred to the Afrimex statement as “reaffirming the principle that companies must re spect human rights, and that doing so requires them to have adequate due diligence processes not only to ensure compliance with the law but also to manage the risk of human rights abuse with a view to avoiding it.” 28

Another important innovation has been the creati on of a review mechanism by which parties may refer alleged procedural irregularities on the part of the NCP to the Steering Board for consideration. The long-standing complaint concerning the UK oi l company BP and the construction of the BakuTblisi-Ceyhan (BTC) pipeline was the first case to be reviewed. The Review Committee (a subcommittee the Steering Board) concluded that although the NCP was seeking to do its best in difficult circumstances in relation to the BTC specif ic instance “the result was unsatisfactory as it breached procedural requirements by failing to provide a reasoned analysis of its decision.”

The Steering Board instructed the NCP to withdraw the final statement issued in August 2007 (some five-and-a-half years after the complaint had been filed), which had dismissed all alleged breaches
of the OECD Guidelines. The NCP had relied on an undisclosed BP report in its decision-making. The Steering Board also instructed the NCP to try to ob tain BP’s consent for sharing the report with the complainants. 29

The UK NCP has clearly benefited from the change s and all stakeholders have acknowledged its fairness and efficiency. 30 The Steering Board is also advising the UK NCP on matters of substance and interpretation of the Guidelines. The Steering Board is currently deliberating its approach to “parallel proceedings” and the question of the need for monitoring of a company’s compliance with
the NCP’s recommendations after a final statement has been issued. The NCP’s initial assessments
and final statements as well as the minutes of the Steering Board are all posted on the UK NCP
website. 31 By enhancing the quality of debate in the UK about the content, meaning, and scope of the Guidelines, the Steering Board also cont ributes to improvements across the OECD.

limit the responsibilities of companies for the activities of subsidiaries, business partners, sub-contractors and suppliers. Under pressure from the US and German governments the OECD has ignore d the references to trade in the text of the Guidelines and employed the alleged lack of investment in a host country to reject complaints, arguing that the Guidelines only apply to inve stment.

28 John Ruggie, letter to Editor of the Financial Times , September 10, 2008, http://www.reports-a nd-materials.org/Rug gie-letter-to-FT-reAfrimex-10-Sep-2008.pdf, (accessed November 1, 2010)

29 UK NCP, “BTC Specific Instance under th e OECD Guidelines for Multinational Enterpr ises: Application for review of the final st atement; Summary of recommendations of the Review Committee;” URN 09/547, September 1, 2009, http://www.berr.gov.uk/whatwedo/sectors/lowc arbon/cr-sd-wp/nationalconta ctpoint/page45873.html (acce ssed November 1, 2010).

30 Joint Working Group Letter to Lord Davies of Abersoch CBE, Mi nister for Trade Investment and Bu siness, Department of Business, Innovation and Skills dated August 30, 2009.

31 Documents archived at http://www.berr.gov.uk/whatwedo/sectors/ lowcarbon/cr-sd-wp/nationalcon tactpoint/page45873.html.**18** 

### Netherlands NCP

The restructured Dutch NCP offers a different, more independent model.

In 2007 the Dutch NCP underwent a major organisati on revision because of sustained criticism by
Dutch NGOs and labor unions. The new structure ha s a number of distinct features. The Dutch NCP was an interdepartmental body based in the Ministry of Economic Affairs. Since the reorganization it has become a bipartite structure composed of four independent experts (including the chair), chosen for their knowledge and repu tation on corporate responsibili ty issues, and four government
advisors (from the Ministries of Economic Affairs, Fore ign Affairs, Social Affairs, and Environment). The change is intended to ensure the independence of the Dutch NCP and avoid conflicting requirements between the functions of the NCP and those of the responsible minister, who serves as
a member of the Dutch cabinet.

Unlike the UK system, there is no formal oversigh t of the NCP’s activities. However, the government can issue a public comment on final statements issued by the Dutch NCP. The link with the government is also maintained through the adviso ry members of the Dutch NCP. The Minister for Foreign Trade instructs the Dutch NCP about any clarifications or other decisions by the OECD Investment Committee which it is expected to take into account in its work.

In 2009 the Dutch NCP published a new, comprehe nsive set of procedural rules, which determine internal responsibilities, timeframes, and other orga nisational matters. The goal of these reforms is to provide a more disciplined, clear, and fair pr ocedure for all complaints submitted to Dutch NCP. 32 Unlike most NCPs, the Dutch NCP has a fixed budget (almost 900,000 Euros for three years). This includes the cost of one full-time officer for prom otional activities located in MVO Netherlands (a separate private entity). In addition, two full-time o fficers from the Ministry of Economic Affairs have
been made available to serve as the secretariat to the Dutch NCP.

The Dutch NCP in its initial assessment always publ ishes the reasons for acce pting a case and in its 2009 Annual Report announced its intention of doing the same in the future for rejected cases. The Dutch NCP has also brought new levels of tran sparency to its procedures. For example, the information that a complainant has already made pu blic before the start of the mediation process can (in most circumstances) remain in the public domain. Information pertaining to the mediation process, including the positions of the parties, must however remain confidential throughout the procedure.

32 Dutch NCP website, http://www.oecdGuideli nes.nl/get-started/filing-complaint/.**19** The Dutch NCP records the status of a complaint on its website, unless one of the parties concerned has a valid objection. If a final statement would of necessity involve the disclosure of sensitive business information, the NCP may choose not to issue a statement. The NCP’s decision on the case will however be posted on the website.

To enhance its effectiveness the NCP organizes two meetings a year, at which stakeholders are given the opportunity to comment on current cases and on the NCP’s promotional activities. Information on current cases is limited of course to the proc edural steps taken by the NCP and the sharing of matters of substance only in so far as this is base d on publicly available information, such as court decisions or local political procedures.

The Dutch NCP has taken a lead in undertaking fa ct-finding missions and its 2009 Annual Report refers to visits to Manila and Dublin over the pr evious year. The Dutch NCP has also earned praise for its positive cooperation with other NCPs in ca ses like the Corrib Gas Project in Ireland and a complaint filed against Shell Caps a in Argentina, both of which involve NCPs in more than one jurisdiction. 33

The emphasis of the Dutch NCP is on resolving issues through mediation though it states that it will not hesitate to issue a final statement on complian ce if parties fail to reach an agreement. But, unlike the UK NCP, it is somewhat early to evaluate the restructured Dutch NCP as none of its current
cases has been concluded and no final statements have been issued.

Both the UK and Dutch models provide interestin g ideas that the US government might wish to consider in any future reconfiguration of the US NCP.



### V. Conclusion and Recommendations

Where Responsibility Lies

Nothing in this comment intends to criticize indi vidual US government officials carrying out the functions of the NCP. The NCP post has always been held by career civil servants whose job is to implement, not make policy.

Primary responsibility for the US NCP rests squarely on senior political appointees who have failed
to make NCP a robust mechanism. Further responsibility lies with Congress, which has not acted sufficiently through funding or oversight me chanisms to strengthen the US NCP.

33 OECD Watch, “Quarterly Case Update,” vol. 4, Issu e 2, Summer 2009, http://oecdwatch.org/publicationsen/Publication_3087/at_download/fullfile.**20** The Obama administration has an opportunity to transform the US NCP and give it an active, vital role in the promotion of US policy on social just ice in the global economy. This would create new opportunities for trade unions, NGOs, and corporatio ns to tackle fundamental issues of sustainable development and international human rights. It would also signal that the Administration is committed to the US engaging seriously with the global community and multilateral institutions.

A reformed, strengthened US NCP should reflect these features:

Legitimacy : governance structures should be clear, transparent, and sufficiently independent to ensure that no party to a particular grievance pr ocess can interfere with the fair conduct of that

process.

Accessibility : information about the NCP mechanism should be widely distributed, with additional guidance available on request. Targeted assistance should be available to help parties overcome language barriers, fears of reprisal should they come forward with complaints, and other obstacles to using the NCP mechanism.

Predictability : the NCP mechanism should have clearly ar ticulated procedures with a timeframe for each stage and clarity on the types of processes and outcomes it can (and cannot) offer; this should include a procedure for monitoring the implement ation of NCP findings and recommendations.

Equitability : aggrieved parties lacking resources, knowledg e, or experience should have reasonable
access to sources of information and to the advice and expertise necessary to engage in a grievance process on fair and equitable terms.

Rights-compatibility : outcomes and remedies should accord with internationally recognized human rights standards.

Transparency : the NCP mechanism should provide suffici ent transparency of process and outcome to meet the public interest concerns at stake and should presume transparency wherever possible. 34

Preceding sections have demonstrated that the US NCP has had one of the poorest records in the world in responding to complaints and facilitating engagement between parties to a dispute. We are

34 These features are drawn from recommended attributes of non-judicial mechanisms to address alleged breaches of human rights standards developed by the UN Special Representative of the Se cretary-General on the issue of human rights and transnational corporations and other business enterprises “based on a year of multi-stakeholder and bilateral consultations related to the ma ndate which involved experts from all stakeholder groups and regions. ” See “Protect, Respect and Remedy: a Framework for Business and Human Rights: Report of the Special Representative to the Unit ed Nations Secretary General on the issue of human rights and transnational corporations and other busin ess enterprises,” April 7, 2008, http:// www.reports-and-materials .org/Ruggie-report-7 -Apr2008.pdf, para. 92.**21** not aware of any cases that have been successfully resolved due to intervention of the US NCP. Meanwhile, more effective NCP models have been developed and implemented in other countries.

The US NCP now has an opportunity to set an example among OECD nations. Without any changes in law, the State Department can restructure the NCP and set new procedures for responding to complaints and integrating the Guidelines into its work and public materials.

We recommend the following changes in the structure and oversight of the NCP, procedures for handling complaints, and promotion and outreach on the Guidelines. These recommendations are informed by new NCP structures in the UK and the Ne therlands, and by a series of consultations held among labor, NGO, and business communities. The recommendations also draw on work of the nongovernmental group OECD Watch, an international network of civil society organizations whose purpose is to inform the wider NGO community about policies and activities of the OECD's
Investment Committee and to test the effectiveness of the OECD Guidelines for Multinational Enterprises. 35



### Structure and Oversight

Recommendations:

• A quadripartite Advisory Board with equal repres entation of each of the stakeholder groups (government, business, labor, and NGOs) should be formed to inform and monitor the NCP’s procedures. Civil society organiza tions should be able to requ est a review of NCP decisions by this advisory board (not a review to “r everse” decisions but to offer suggestions for reconsideration).

• The NCP should be located in the DOS bureau with the most knowledge of the issues addressed in the OECD Guidelines, the Bureau of Democracy, Human Rights, and Labor.

• The NCP should hold regular consultations, at least annually, with stakeholder groups including worker organizations and NGOs.

• Organizations that bring specific complaints should be able to re quest a review of NCP decisions by the advisory board.

• The NCP should be allocated sufficient resources to carry out its mission.

35 OECD Watch maintains extensive information on the Guid elines and the work of NCPs. See http://oecdwatch.org.**22** 

### Procedures

Recommendations:

• A clear timeframe for reaching a final conclusion on complaints should be agreed upon, with
an overall timeframe of not more than 12 months.

• This timeframe should include, for each spec ific instance of alleged violation of the Guidelines reported to the NCP, (a) immediate acknowledgement of receipt, (b) an initial assessment within three months, (c) fact-finding, (d) mediation where necessary (generally not more than six months), (e) an assessment and decision-making period, and (f) release of a final statement including clear indications of what, if any, violations of the Guidelines
occurred.

• It should not be assumed that any parallel pr oceeding under national or international law would preclude the NCP from accepting a case. In cases where the NCP feels that taking a case would prejudice criminal proceedings, the NCP should pr ovide a clear rationale which can be reviewed by the advisory board.

• The NCP should strive for transparency whil e respecting the Guidelines’ confidentiality provisions. Initial assessment results and fina l statements should be publicly posted.

• The NCP should be prepared both to mediate spec ific instances, if nece ssary, by contracting with an external mediator, and to make final determinations regarding compliance with the Guidelines. In line with this, the NCP shou ld prepare a roster of qualified mediators approved by the advisory board.

• A final statement should be released in all acce pted cases, and should include review of the evidence provided and a determination of whether the alleged violator complied with the
Guidelines.