On May 25, 2011, the Organization for Economic Cooperation and Development (OECD) released its long-awaited update to the Guidelines for Multinational Enterprises, and international human rights and labor groups let out a collective sigh of disappointment and frustration. ERI and other groups have been keen to engage with this voluntary code of conduct and promote its principles, as it is the only government-endorsed, multilateral structure that covers the full range of business impacts on communities and individuals, and it includes a unique, state-sponsored mechanism for resolving disputes between companies and those affected by their operations. The Guidelines, however, have consistently failed to live up to their promise since they were last updated in 2000. The new additions introduce welcome changes to the substance of the Guidelines, but they keep the dispute resolution mechanism deliberately weak, reducing the chances that businesses will have to take the Guidelines seriously.
In order to understand why the update is so disappointing, it’s necessary to distinguish between the substance and procedure of the Guidelines. In terms of substance, the Guidelines have always been quite broad – they cover everything from taxation to the environment – but until now, they featured notable gaps in areas such as human rights and supply chain management. In substance, the updated Guidelines are a major improvement over the last version; they include many of the things that human rights groups like Amnesty International (and, of course, ERI) and trade unions have been calling for over the years. For example, multinational companies are now expected to conduct their operations so as to avoid human rights impacts not just by their own direct activities, but also by those of their suppliers and contractors.
As far as procedure goes, however, the update gives little comfort to the individuals and communities who are affected by the irresponsible actions of multinational corporations. Civil society groups and labor organizations – led by OECD Watch and TUAC, two international coalitions dedicated to improving the Guidelines and their implementation – had hoped that the new version of the Guidelines would strengthen the process established by the Guidelines to help resolve cases (or “specific instances”) in which companies are accused of violating the Guidelines. This process, which is mediated by National Contact Points (NCPs) established by the government of each Guidelines-adhering country, is notoriously broken and toothless – nowhere moreso than in the United States, where the NCP has never successfully resolved a specific instance to both parties’ satisfaction.
National Contact Points
NCPs have been consistently hobbled by structural and procedural weaknesses. They’re often located in government agencies responsible for promoting trade and investment, imbuing them with a pro-corporate bias. They’re rarely overseen in any sort of systematic or impartial way. They often operate in great secrecy and are not required to abide by any timelines for the processing of complaints and requests. And – particularly in the U.S. – they have resisted taking on any sort of fact-finding function or making determinations as to whether any of the Guidelines have in fact been breached in a specific instance. As a result, companies have little incentive to cooperate with the NCP, change their behavior, or even comply with the Guidelines in the first place. And individuals and communities find the NCP an unwelcoming place to resolve their grievances.
During the Guidelines update process, OECD Watch and TUAC – with ERI’s participation – made great efforts to improve the specific instance procedure. Common sense suggestions for reform included:
- Requiring that NCPs avoid conflicts of interest and including some participation and oversight from government officials that are not tasked with promoting corporate activity;
- Developing recommended timelines for processing various stages of the specific instance process;
- Imposing a presumption of transparency, rather than the traditional cloak of secrecy; and
- Affirming that NCPs can properly make findings of fact and issue (non-binding, of course) determinations about whether or not the Guidelines have been breached in a specific instance.
Unfortunately, the updated Guidelines include none of these improvements, except for some vague wording about the importance of impartiality for the NCP. It seems likely that the U.S. delegation to the OECD is at least partially responsible for this failure to establish basic NCP accountability, as the U.S. has for years belonged to a group of nations with low-performing NCPs, in contrast to countries like France, the United Kingdom, and the Netherlands, which have taken great strides to enhance the ability of their NCPs to resolve disputes.
One indicator of the U.S.’s commitment to the Guidelines will become apparent in the coming months, when the State Department announces the result of its own internal process to revamp the U.S. NCP. The U.S. NCP is housed in the Bureau of Economics, Energy and Business and operates according to rules of strict confidentiality, and civil society and labor organizations report that it has historically been of practically no assistance in resolving Guidelines disputes with businesses. Last year, ERI participated in an advisory subcommittee to the State Department that was tasked with making recommendations for NCP reform. It remains to be seen whether the U.S. will maintain its historic stance -- a stance that has resulted in a NCP with the same shortcomings as those evident in the updated Guidelines – or will recognize the utility of a robust specific instance process that would actually provide incentives for businesses to behave responsibly and consistently with the Guidelines.
The truth is that even if their substance were exactly as human rights and labor organizations wished, the Guidelines would remain simply another aspirational document without a functioning mechanism to encourage compliance and resolve disputes. The Dutch and British governments, which take their NCPs seriously, have successfully brought communities and companies together around shared values and best practices in a number of cases. The Guidelines update was a missed opportunity to set a floor of impartiality and accountability that could have ensured a similar level of performance in other countries. Now it’s up to the U.S. to show that it can do this on its own – that it can create a NCP that is capable of fostering respect for the principles the Guidelines are supposed to represent.
