Source: http://lcbackerblog.blogspot.com/2009/11/part-ii-oecd-vedanta-indian-supreme.html
Timestamp: 2018-01-23 17:47:47
Document Index: 620358766

Matched Legal Cases: ['§ 8', '§ 8', '§ 10', '§ 11', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 12', '§ 14', '§ 16', '§ 17', '§ 22', '§ 32', '§ 33', '§ 28', '§ 35', '§ 44', '§ 44', '§ 46', '§ 28', '§ 48', '§48', '§49', '§ 50', '§51', '§18', '§52', '§ 52', '§ 56', '§ 61', '§ 63', '§75', '§ 77', '§ 78']

Law at the End of the Day: Part II: The OECD, Vedanta, & the Indian Supreme Court—Polycentricity, Transnational Corporate Governance and John Ruggie’s Protect/Respect Framework
Part II: The OECD, Vedanta, & the Indian Supreme Court—Polycentricity, Transnational Corporate Governance and John Ruggie’s Protect/Respect Framework
In Part I of this essay, Larry Catá Backer, Part I: The OECD, Vedanta, and the Supreme Court of India—Polycentricity in Transnational Governance--The Issue of Standing, Law at the End of the Day, Nov. 1, 2009, I posited that the state system remains stubbornly grounded in a monocentric view of law and regulation, even as it implements polycentric governance systems through intergovernmental and other international organizations. Slowly, and in increasingly evident ways, supra-national actors, and primarily multi-national corporations, are confronting not only traditional state based law systems, but also and simultaneously, supra-national norm systems. Larry Catá Backer, On Challenges to Operationalizing a Transnational Framework for Business and Human Rights--the View From Geneva, Law at the End of the Day, Oct. 13, 2009.
I also suggested that nowhere is this more evident than in the transnational system of National Contact Points for the administration of the Organization for Economic Cooperation and Development’s (OECD’s) soft law principles based governance system for multinational corporations—the soon to be revised Guidelines for Multinational Enterprises (2000). I then turned to recent activity of the U.K. National Contact Point (“UK-NCP”) that well highlights both the structure and autonomy of such norm systems from state based law systems by examining the recent Initial Assessment by the UK National Contact Point for the OECD Guidelines for Multinational Enterprises: Survival International and Vedanta Resources plc, March 27, 2009 (“Initial Assessment”) and the. Final Statement by the UK National Contact Point for the OECD Guidelines for Multinational Enterprises: Complaint from Survival International against Vedanta Resources plc, 25 Sept. 2009 (“Final Statement”).
Part I was focused on the issue of standing elaborated in those works. The approach of the UK-NCP suggests a broader interest-based stakeholder focus for standing than either one narrowly drawn on an “injury in fact” approach of the United States or even the “sufficient interest” standard of English law. Indeed, I posited that the UK-NCP’s was neither derived from any legal standard, nor otherwise bound by the rules of law-based systems. Rather, the UK-NCP grounded its approach on its assessment of the principles underlying the substantive provisions of the Guidelines and the governance structure of the OECD Guidelines system itself. By adopting a stakeholder formulation for standing, the UK-NCP remained true to the internal logic of the Guidelines, and thus autonomous of national law and its restrictions. As a consequence, while Survival International might not have been able to assert appropriate standing in this case in an action brought before UK courts (putting aside the issue of Vedanta as a proper party, rather than that of its subsidiaries, the legal persons whose actions were at issue directly), it could maintain such a complaint within the governance system of the OECD and its Guidelines for Multinational Corporations.
Yet, the systemic autonomy suggested by the UK-NCP’s approach to standing was substantially deepened in its application of the substantive rules of the Guidelines to Vedanta. It is to that aspect of the UK-NCP’s Final Statement that this part of the essay turns. Recall that Survival International alleged that Vedanta’s Indian subsidiaries had failed to adequately consult with a local ethnic group, the Dongria Kondh, in connection with the development of mining operations in the Indian state of Orissa. (Final Statement, supra, at § 8). These operations were to be undertaken jointly with an instrumentality of that Government. (Final Statement, supra, at § 8, 21).
These failures, Survival International argued, constituted a breach of several international conventions (International Covenant on Civil and Political Rights; Convention on the Elimination of al Forms of Racial Discrimination; and Convention on Biological Diversity) and India’s domestic law (Scheduled Tribes and Other Traditional Forest Dwellers Act of 2006). (Final Statement, supra, at § 10(b) & (c)). Those alleged breaches, Survival International asserted also constituted breaches of the Guidelines (Chapter II(2) (respect human rights consistent with host government’s international obligations); Chapter II(7) (development of self regulatory practices and management fostering mutual trust between enterprises and local communities); and Chapter V (2)(b) (engagement in adequate and timely communication and consultation with affected communities). (Final Statement, supra, at § 11).
Vedanta raised four points in response. First, it argued that Survival International had not met its evidentiary burden for standing, specifically because it offered no evidence that it had the support of the Dongria Kondh. Final Statement, supra, at § 12(a). Second, it argued estoppel. Because the mine project had been approved by the Supreme Court of India and the State of Orissa, the allegations, had no basis, especially since for its judgment the Supreme Court of India considered the issues raised by Survival International. Final Statement, supra, at § 12(b). Third, Vedanta argued that its corporate social responsibility standards , evidenced by its published annual reports sufficiently met the charges of the complain with respect to adequacy of systems and engagement with local communities. Final Statement, supra, at § 12(c). Lastly, Vedanta argued that it had adequately consulted with the local communities, participated in its resettlement of affected families, and was committed to “its Integrated Village Development Program.” Final Statement, supra, at § 12(d). More importantly, though, it suggested that revisiting those issues was unnecessary because, having considered these issues under Indian law, “the Supreme Court of India ‘was satisfied that the local communities (of which the Dongria Kondh are a part) had been consulted appropriately.’” (Final Statement, supra, at § 12(d)).
But having raised these points in a letter to the UK-NCP (Id., at § 12), Vedanta then failed to participate in any further proceedings, other than through an exchange of emails and letters. (Id., at § 14). Vedanta also declined an offer of mediation, and though, at Vedanta’s request, an extension was given to deliver evidence, Vedanta submitted no further evidence to support its claims. (Id., at § 16). For this faolure to participate it was berated by the UK-NCP. The UK NCP was disappointed by Vedanta’s decision not to engage fully with the UK NCP’s complaint process.
The UK NCP was particularly disappointed with Vedanta’s refusal to take up its offer of sponsored professional conciliation/mediation, and Vedanta’s failure to provide any evidence during the examination stage to support its position in respect of the complaint. (Id., at § 17).
This is ironic, of course, when juxtaposed with the language of the Final Statement at paragraphs 1-2. But the irony is important. It suggests that while the Guidelines remain purely voluntary, in the sense that they are not mandatory within domestic law-systems, the governance framework itself privileges the member state’s obligation to “encourage” observance of the Guidelines wherever they operate. To that end, the social-norm system is both optional (with respect to multinational enterprises) and also mandatory (with respect to the obligations of states participating in this optional system). It is in that sense that Paragraphs 1-2 and 17-18 of the Final Statement become comprehensible.
The UK-NCP spent a considerable amount of time digesting Surbival International’s evidence of the relationship between the Dongrai Kondh and the land which they inhabit. (Final Statement, supra, at §§ 22-34(. Beyond establishing a factual basis for the conclusions of the UK-NCP, the material is interesting in two particular respects. First, the UK-NCP used its factual development to attack the neutrality of the State of Orissa in these proceedings. Because, in effect, the State of Orissa was engaged in commercial activity along with Vedanta’s subsidiaries, it would be treated like a private party. As such its assessment of compliance with law purportedly made in its sovereign capacity, would be given little weight.
In addition, the UK NCP is concerned that the views of the State of Orissa may be influenced by the fact that the Orissa Mining Corporation Limited, a State of Orissa owned company, is in joint venture with Sterlite Industries on the construction of the bauxite mine in the Niyamgiri Hills. For these reasons, the UK NCP decided to give greater weight to the evidence from the Central Empowered Committee. (Final Statement, supra, at § 32).
Second, the UK-NCP sought to distinguish the judgment of the Indian Supreme Court as potentially based on a factual error. (Final Statement, supra, at § 33 (with respect to the issue of the connection between the places inhabited by the local community and the proposed site of the mining operations)). It noted a possible discrepancy between the report of the Central Empowered Committee, “established by the Supreme Court of India in 2002 with a broad task to monitor and ensure the compliance of the orders of the Supreme Court concerning the subject matter of forests and wildlife and other issues arising out of said orders” (Id., at § 28) and the representation by Vedanta of the Indian Supreme Court’s conclusions. This is a subject taken up again in the UK-NCP’s consideration of Vedanta’s compliance with its consultation duties.
Likewise, the NCP-UK devotes a substantial amount of space to the adoption of Survival International’s view about the consultations between the mining stakeholders and the Dongria Kondh. (Final Statement, supra, at §§ 35-56). It is thin this discussion that the UK-NCP begins to elaborate its theory for the irrelevance of the opinion of the Supreme Court of India to the extent of Vedanta’s obligation to comply with the OECD Guidelines. First, the UK-NCP look directly to international instruments for a standard against which to judge the adequacy and timeliness of Vadanta’s communications. (Final Statement, supra, at §§ 44-47).
The UK NCP considers that Article 10 of the “Akwe: Kon Guidelines”, produced by the Secretariat of the Convention on Biological Diversity in 2004, provides a good indication of what constitutes an “adequate and timely” consultation with indigenous groups because it takes into account the specific needs of indigenous people like the Dongria Kondh and enables companies practically to take these needs into account when consulting indigenous groups. (Final Statement, supra, at § 44).
Like the Guidelines, themselves, the Akwé: Kon are voluntary guidelines for the conduct of impact assessments relating to development that would take place or otherwise affect sacred sites and other areas occupied or used by indigenous or local communities. (See Secretariat of the Convention on Biological Diversity, Akwé: Kon Guidelines (2004)). In the forward to the 2004 brochure, Hamdallah Zedan, noted that “[i]t is expected that impact assessment procedures and methodologies embodied in the Voluntary Guidelines will play a key role in providing information on the cultural, environmental and social impacts of proposed developments.” (Id., at 1). These Guidelines were intended, in part, to be used “in conjunction with the guidelines for incorporating biodiversity related issues into environmental impact assessment legislation.” (Id., at 2). But it now also serves as part of the fabric of voluntary norms that are acquiring significance as defining behavior within social-norm systems. And so the UK-NCP treated the Akwé: Kon. In this sense, voluntary Guidelines, like their law-system statutory counterparts, do not stand in isolation. Instead each together serves as a strand defining a fabric of governance with its own internal logic and application. In this case, an application that is legitimate without any dependency on the conventional otherwise legitimacy conferring actions of states. Having grafted the Akwé: Kon onto the Guidelines, the UK-NCP determined that Vedanta failed in its obligations under the Akwé: Kon and consequently also under the Guidelines. (Final Statement, supra, at § 46, 79).
But the UK-NCP was confronted with a difficult fact. Having relied on the Central Empowered Committee’s report (id., at § 28), it had to determine the effect of the subsequent action of the Indian Supreme Court and the role of the State of Orissa. (Final Statement, supra, at §§ 48-51). The UK-NCP noted that the State of Orissa rejected the report of the Empowered Committee, and its determination that under its own law an adequate level of local consultation had been undertaken. (Id., at §48). The UK-NCP first discounted the State of Orissa’s determinations. (Id., at §49). Moreover, in keeping with its objections to Vedanta’s failure to enthusiastically participate in the proceedings, it chose to read narrowly the bare assertions of participation in local consultations (id., at § 50) or the truth of the assertion that the State of Orissa “carried out a separate consultation.” (Id., §51). This later punitive position is somewhat jarring especially in light of the UK-NCP’s announcement of its efforts to seek additional information from “other relevant UK Government Departments, business and trade union’s organizations, and civil society.” (Id., §18). Tellingly absent was any effort to seek information from that government most directly involved—that of the Indian State or Orissa. In a case in which the principal actors, both sovereign and private were in India, it remains something of a mystery why the UK-NCP, otherwise so willing to reach out to other constituencies, became painfully shy about reaching out beyond its own borders. This is perversely ironic in light of its aggressive willingness to read the instruments under which it is operating as fundamentally global or at least transnational. It is easy to see, though, why officials in India might view this as less than benign neglect. Read through a post-colonial prism, it is insensitive at best (and ironically so given the expressed need for sensitivity throughout the Final Statement) or at worst a fairly ostentatious (though perhaps unconscious) bit of post colonialist domineering by the former colonial master, now playing the role of teacher to what two generations ago would have been its colonial administrative servants. Sadly, of course, this sort of insensitivity can have significant negative repercussions on the viability of the potentially laudable system the UK-NCP is seeking to implement.
Yet if the official actions of the government of the State of Orissa are relatively easy to distinguish, the actions of the Supreme Court of India are not. (Final Statement, supra, §§52-56). Here again, the analytical approach of the UK-NCP is telling, both in its elaboration of a theory of supra-national autonomy for the Guidelines (and Guidelines system), and in its carelessness in the matter of post-colonial sensitivity. The UK-NCP first attempts to distinguish the rulings of the Supreme Court of India. (Final Statement, supra, § 52-55). “Neither Order suggests that the Supreme Court of India ruled (or was asked to rule) specifically on the need to consult local and indigenous communities, of which the Dongria Kondh are part.” (Id., at § 56).
But more importantly, the UK-NCP determined that even if the Indian Supreme Court’s rulings were determinative of Vedanta’s obligations under Indian law, they had no effect on a determination of Vedanta’s obligations under the Guidelines, and especially on the application of the Guidelines within the company’s home jurisdiction.
The UK NCP is not aware of whether consultation with indigenous groups is mandatory under Indian law, however Chapter V(2)(b) of the Guidelines does recommend consultation with communities directly affected by a multinational enterprise’s environmental, health and safety policies and their implementation. The UK Government expects UK registered companies operating abroad to abide by the standards set out in the Guidelines as well as to obey the host country’s laws. (Id.).
Vedanta is thus faced with the simultaneous application of two governance systems, the law-system of India and the social-norm system represented by the Guidelines. That polycentricity is both disconcerting to entities subject to its rules as well as to conventional notions of governance that are both linear (only one set of laws can operate at one place at one time) and that privilege the law-systems of domestic law as beyond contradiction when applied within their territory.
VAL questioned the legal right of UK-based agency to comment on the possible impact of a project being developed in India and considered its interference to be against the nation's sovereignty. “We condemn the findings of the UK-based agency. Our bauxite mining project at Niyamgiri hills has been cleared by the Supreme Court, the highest judicial authority in India. It is inappropriate for the agency of any other country to comment on a project being developed in India”, Mukesh Kumar, chief operating officer of VAL's Lanjigarh project told Business Standard. Vedanta condemns UK agency's findings, Business Standard, Oct. 14, 2009).
Thus Vedanta’s response was both conventional, and conventionally correct, but missed the point –that governance systems have been evolving.
The simultaneity that tends to shrink the breadth of sovereign regulation, even of matters that occur within its own territory, and which Vedanta criticized correctly on traditionalist conventional grounds, applies not only to conformity to rules, but also to determination of the extent of the compliance by the host state of its own obligations under international law. Thus, and remarkably, the UK-NCP determined that Vedanta could not rely on India’s assessment of its own compliance with international law to which it had bound itself in an action arising under the Guidelines. In the later case, the determination of Indian compliance with its obligations would be made independently on the basis of the interpretation of those obligations in the forum in which it defends complaints.
While the UK NCP acknowledges the difficulty of UK multinational companies, including Vedanta, to keep track of the international human rights obligations both of the UK and of the host countries in which they operate, companies should nonetheless establish a system that helps them assess and keep track of the human rights impact of their economic activities. (Id., at § 61).
And again, the colonists overtones are both unfortunate and unmistakable. Still, in this regard, the UK-NCP offers small consolation. It declined to consider the issue of the violation of Indian law. “It is outside the UK NCP’s remit to determine companies’ violation of local law and regulations with no reference to the Guidelines.” (Id., at § 63). Yet this, also, is grounded in the effort to outline an autonomous system of governance untied to any national law-system. However, there is a sting here as well. While local Indian law is beyond the jurisdiction of the UK-NCP under the Guidelines, the extent of India’s compliance with its own international law obligations may be at least indirectly subject to analysis, though not of protection for a company faced with a complaint under the Guidelines.
But how to escape this potential contradiction? The UK-NCP suggests a set of mediating principles in the form of the approach to business and human rights being developed by John Ruggie in his capacity as Special Representative of the Secretary General of the UN on the issue of human rights and transnational corporations. (Final Statement, supra, §§75-78). Especially important in terms of the mediating principles that might be applied to avoid conflict polycentricity was Mr. Ruggie’s analytical framework described in his 2009 Report, Report of the Special Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, Business and human rights: Towards operationalizing the “protect, respect and remedy” framework”, United Nations, 22 April 2009, paragraph 50. (Id., at § 77).
To this effect, Vedanta should consider implementing John Ruggie’s suggested key steps for a basic human rights due diligence process: Adopting a human rights policy which is not simply aspirational but practically implemented; Considering the human rights implications of projects before they begin and amend the projects accordingly to minimise/eliminate this impact; Mainstreaming the human rights policy throughout the company, its subsidiaries and supply chain; [and] Monitoring and auditing the implementation of the human rights policy and company’s overall human rights performance. (Final Statement, supra, § 78).
The UK-NCP thus does two things by pointing to the development of a United Nations based soft law principles based system for governance. First, it reinforces the notion of systemic autonomy for social-norm systems. The due diligence requirements applicable under the Guidelines are independent of compliance with the law or standards of any state, including the host state where the alleged misbehavior occurs. Second, it suggests the growing integration of soft law systems into a more coherent single web of obligations, principles and standards that can more easily stand alone. No longer dependent on law-systems for legitimacy or expression, it can serve as an independent source of corporate obligation, one that not dependent on or inferior to the obligations imposed simultaneously on corporations by host or home state legal systems.
And thus one can understand the nature of the governance polycentricity at the heart of the UK-NCP’s analysis. The UK-NCP, more than other organs of the OECD apparatus for developing its principles based governance norms, has become a leading voice in the arplication of a social norms based framework drawn from an increasingly comprehensive network of governance standards being developed at the supra national level. Polycentricity is not merely about the enforcement of the Guidelines. It is as well about the intermeshing of a large number of norms architectures into something like a comprehensive and coherent structure of governance. See, Larry Catá Backer, Case Note: Rights And Accountability In Development (Raid) V Das Air (21 July 2008) And Global Witness V Afrimex (28 August 2008); Small Steps Toward an Autonomous Transnational Legal System for the Regulation of Multinational Corporations, 10(1) Melbourne Journal of International Law 258 (2009). But the UK-NCP's emerging analytical and substantive framework is not merely about layering governance, that is not not just polycentricity. Rather, because polycentricity produces potential tension among simultaneously operating systems, the move toward supra-national social-norms based governance also includes a strong mediating element. In this case it is looking to the supra national system itself to serve both as source of autonomy and as a bridging element between principles based systems at the supra national level and law based state systems. And with respect to mediation, as well as substantive principles in the area of business and human rights, it appears that the Protect/Respect/Remedy framework being developed by John Ruggie may serve as a baseline.
Posted by Larry Catá Backer at 11/03/2009 02:54:00 PM
Labels: corporate governance, globalization, Internatonal law, markets, Supra-national organizations