The National Contact Point system under the OECD Guidelines for Multinational Enterprises is the first and still one of the very few international mechanisms established by governments to enable individuals, communities or their representatives to bring complaints against multinational corporations. The introduction of a specific human rights chapter to the OECD Guidelines in 2011 has led National Contact Points to become a nascent and potentially significant mechanism to address human rights concerns related to activities of multinational companies. Here, we explain what the OECD is, how its Guidelines for Multinational Enterprises work, and how the National Contact Point system can be used to address business violations of human rights.
What is the OECD?
The Organisation for Economic Development (OECD) was established in 1961, and aims to improve “the economic and social well-being of people around the world.” It has 34 member states globally, including the UK and Israel, which participate in peer reviews and follow agreements, standards and recommendations on how to achieve economic growth and financial stability.
What does the OECD have to do with business and human rights?
In 1976, the OECD Guidelines for Multinational Enterprises (the OECD Guidelines) were adopted. The OECD Guidelines are government-backed recommendations to enterprises regarding responsible business conduct in their worldwide operations. This is the only corporate responsibility instrument to have been adopted by all 34 member countries of the OECD, as well as eleven non-OECD countries. By endorsing the OECD Guidelines, these adhering governments convey an expectation that multinational companies should follow standards of good conduct (now ranging in scope from human rights, to science and technology, to taxation) in their operations worldwide.
In 2011, a human rights chapter (Chapter IV) was introduced to the OECD Guidelines for the first time. The chapter draws heavily on the 2011 UN Guiding Principles on Business and Human Rights (UNGPs) and its effect has been substantial; within one year, one in three cases alleging a breach of the OECD Guidelines referred to this new human rights chapter. The introduction of a human rights chapter in the OECD Guidelines reflects a recent increase in instruments and initiatives that promote, and challenge, companies’ social responsibilities and impacts, particularly in the wake of the UNGPs.
What is the role of governments that have adopted the OECD Guidelines and what is a National Contact Point?
Governments adhering to the OECD Guidelines are obliged to set up National Contact Points (NCPs) whose main role is to ‘further the effectiveness of the [OECD] Guidelines’. The NCP’s role includes handling the submission of complaints on suspected violations of the OECD Guidelines.
The OECD Guidelines constitute the only government-backed international instrument on responsible business conduct with a built-in grievance mechanism. This complaints mechanism requires NCPs to provide a platform for discussion and assistance to parties to help find a resolution for issues arising from the alleged non-observance of the OECD Guidelines.
NCPs are not part of the OECD and have no wider responsibilities for OECD functions.
Has the UK government established a National Contact Point to further the effectiveness of the OECD Guidelines?
Yes. The UK National Contact Point (UK NCP) is situated within the Department for Business, Skills and Innovation (BIS) and is partly funded by the Department for International Development. It is staffed by a small team of officials and operates independently of BIS Ministers in its consideration of complaints. The UK NCP has a steering board including members from business, trade unions and civil society.
What human rights provisions of the OECD Guidelines did LPHR cite in its complaint against G4S?
The following table sets out the human rights provisions of the OECD Guidelines that LPHR cited in its complaint against G4S, as well as summarising the UK NCP’s findings in relation to each provision.
OECD Guidelines provision | Text of provision | NCP’s finding |
Chapter II, paragraph A2: | “Enterprises should…respect the internationally recognised human rights of those affected by their activities.” | G4S’ activities are technically inconsistent with this provision (NCP Final Statement) |
| Chapter IV, paragraph 1 | “Enterprises should…respect human rights which means they should avoid infringing on the human rights of others and should address human rights impacts with which they are involved.” | G4S’ activities are technically inconsistent with this provision (NCP Final Statement) |
| Chapter IV, paragraph 2 | “Enterprises should…avoid causing or contributing to adverse human rights impacts and address such impacts when they occur.” | Alleged violation not substantiated (UK NCP Initial Assessment) |
| Chapter IV, paragraph 3 | “Enterprises should…seek ways to prevent or mitigate adverse human rights impacts that are directly linked to their business operations…even if they do not contribute to those impacts.” | G4S’ activities are inconsistent with this provision (NCP Final Statement) |
| Chapter IV, paragraph 5 | “Enterprises should…carry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts.” | Alleged violation not substantiated (UK NCP Initial Assessment) |
What is the difference between Chapter IV, paragraph 2 and Chapter IV, paragraph 3 of the OECD Guidelines?
Chapter IV, paragraph 2 of the OECD Guidelines refers to situations where a company’s actions cause or contribute to adverse human rights activities. According to the OECD Guidelines commentary accompanying this paragraph, “Where an enterprise contributes or may contribute to such an impact, it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impact to the greatest extent possible. Leverage is considered to exist where the enterprise has the ability to effect change in the practices of an entity that cause adverse human rights impacts. ”
Chapter IV, paragraph 3 of the OECD Guidelines refers to adverse human rights impacts where, according to the commentary: “an enterprise has not contributed to an adverse human rights impact, but that impact is nevertheless directly linked to its operations, products or services by its business relationship with another entity. Meeting the expectation in paragraph 3 would entail an enterprise, acting alone or in co-operation with other entities, as appropriate, to use its leverage to influence the entity causing the adverse human rights impact to prevent or mitigate that impact. ”
For further information on these and other provisions of the OECD Guidelines, see Professor Peter Muchlinski’s article on the OECD Guidelines for Multinational Enterprises.
How do Chapter IV paragraph 2 and Chapter IV paragraph 3 provisions of the OECD Guidelines relate to the corporate responsibility to respect human rights?
Chapter IV paragraph 2 and Chapter IV paragraph 3 of the OECD Guidelines are both drawn from the “Corporate Responsibility to Respect Human Rights” chapter of the United Nations Guiding Principles on Business and Human Rights (UNGPs).
Principle 13 of the UNGPs, states:
“The responsibility to respect human rights requires that business enterprises:
(a) Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur;
(b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.”
Principle 13 of the UNGPs therefore makes clear that a failure to comply with the requirements of either Principle 13 a) or b) would necessarily be a breach of the corporate responsibility to respect human rights. This is reflected in the OECD Guidelines by reading the provisions at Chapter IV paragraph 2 or Chapter IV paragraph 3 in conjunction with the ‘respect human rights’ provisions at Chapter 2 paragraph A2 and Chapter IV paragraph 1.
A finding of breach of either Chapter IV paragraph 2 or Chapter IV paragraph 3 provisions of the OECD Guidelines is therefore necessarily a breach of the corporate responsibility to respect human rights.
For further information on the provisions of the OECD Guidelines, see Professor Peter Muchlinski’s article on the OECD Guidelines for Multinational Enterprises. To read the UNGPs, please see here.
What is due diligence and why is it relevant to business and human rights?
The OECD Guidelines make it clear that due diligence is necessary in order to prevent businesses becoming involved in human rights abuses. According to the commentary on Chapter IV, paragraph 5, due diligence is a process “through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts as an integral part of business decision-making and risk management systems.” It “entails assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses as well as communicating how impacts are addressed…It is an on-going exercise, recognising that human rights risks may change over time as the enterprise’s operations and operating context evolve…”
For further information on this and other provisions of the OECD Guidelines, see Professor Peter Muchlinski’s article on the OECD Guidelines for Multinational Enterprises.
Are the OECD Guidelines legally binding?
The OECD Guidelines are a soft-law mechanism for promoting corporate respect for human rights; adherence to the OECD Guidelines is voluntary, and there is no legally enforceable remedy in respect of a company that breaches them. The implementing National Contact Points have no powers to impose sanctions or award compensation, so a satisfactory resolution depends on the goodwill of the company involved. This reflects the approach taken in the UNGPs, which recognise that whilst, under international law, only states have legally binding obligations to protect human rights, businesses have a non-binding ‘responsibility’ to do so too.
How can a company’s alleged breach of the OECD Guidelines be challenged?
Any interested party, commonly NGOs and trade unions, can submit a complaint alleging a breach of the OECD Guidelines. These complaints can be brought to the NCP situated in the country in which the alleged breach is occurring, or otherwise to the NCP situated in the country in which the company, or its parent company, is incorporated/has its head office. LPHR’s complaint to the UK NCP in relation to G4S can be viewed here [LINK].
Once submitted, the NCP guides the complaint through up to three phases.
Initial Assessment
During this phase, the NCP provides the company with the opportunity to respond to the complaint. The NCP then considers the information contained within the complaint and the response received from the company. The NCP compiles its findings in an “Initial Assessment”. The UK NCP’s Initial Assessment in respect of LPHR’s complaint against G4S can be accessed here.
Mediation/Further Examination
If the NCP accepts that the issue(s) in the complaint are ‘material and substantiated’, it will proceed to a mediation or further examination phase. As a first step, the NCP will offer its ‘good offices’ to the parties, to facilitate discussion and mediation between them. As the OECD Guidelines are not legally binding and the NCPs have no enforcement powers, if one or both parties decline to enter into mediation, it will not happen. In such circumstances, the NCP will engage in its own further examination of the issues, which can include conducting interviews with relevant sources. In LPHR’s complaint against G4S, LPHR accepted entering into mediation, but G4S declined. The UK NCP therefore commenced its own further examination of the issues.
Final Statement
In the third and final stage of the process, the NCP will issue a “Final Statement”, detailing how the complaint has progressed, what has been agreed between the parties or, in the absence of agreement, what final findings the NCP has made as to breach of the OECD Guidelines. The UK NCP’s final statement in respect of LPHR’s complaint against G4S is available here [LINK], and is discussed in more detail in this public statement [LINK].
What happens after the NCP’s Final Statement is issued?
In some instances, the UK NCP will also include within its Final Statement specific recommendations for future practices. If any are made, the UK NCP may also specify a date by which the parties will be asked to provide the NCP with information on the progress of implementing these recommendations. The UK NCP will then prepare and publish a “Follow-Up Statement”, analysing the parties’ responses and providing its own conclusions. In LPHR’s complaint, the UK NCP has made three recommendations and has asked the parties to submit follow-up information in March 2016, to consider the progress made.
What does the OECD Guidelines complaints process provide as a means of addressing businesses’ involvement with human rights violations?
In the absence of any binding legal obligations on companies under international human rights law, one of the most productive outcomes of a complaint submitted to a NCP is for the parties to agree, through a non-adversarial mediation process, that a company’s offending practices be altered to bring them into line with the requirements of the OECD Guidelines. Even where the parties have not been able to reach such a conclusion through mediation, as in the case between LPHR and G4S, the NCP’s recommendations provide a highly constructive framework around which to base future dialogue for the improvement of business impacts on human rights.
Claire Jeffery, Tareq Shrourou