This year marks twenty years since the introduction of OECD National Contact Points for Responsible Business Conduct (NCPs) as non-judicial grievance mechanisms under the OECD Guidelines for Multinational Enterprises (the Guidelines). The Guidelines provide recommendations to businesses on a wide range of responsible business conduct topics – including disclosure, human rights, environmental protection, labour standards and the fight against corruption. Importantly, the Guidelines are the only responsible business conduct instrument that provide for a state-based grievance mechanism.
Today NCPs are established in 49 OECD countries. Their main tasks include: promoting the Guidelines and handling complaints (so called “specific instances”) regarding alleged breaches of the Guidelines. So far NCPs have collectively dealt with over 500 cases in more than 100 countries. In recent years, proceedings before NCPs have played an important role in resolving cross-border human rights, social and environmental disputes.
Specific instance procedures
While the Procedural Guidance that is attached to the Guidelines provides some rules for the handling of specific instance procedures, NCPs generally have great flexibility when it comes to the handling of cases and many NCPs have published their own rules of procedure. A typical complaint procedure follows a three-stage process:
- the initial assessment proceedings: during which the NCP determines whether the case merits further examination;
- the offering of “good offices”: which ranges from the provision of informal dialogue to the offering of professional mediation; and
- the conclusion of the procedures: which typically includes a final statement by the NCP. In recent years, cases often also include follow-up procedures so as to ensure compliance with the outcome of the NCP proceedings.
According to the Procedural Guidance, NCPs should aim to conclude a case within twelve months. However, due to the complexity of many cases – often including long and difficult channels of communication with complainants located in remote areas – specific instances usually take longer and are typically completed within 2-4 years. Moreover, the Procedural Guidance stresses that while NCPs should act as transparently as possible, they should still take steps to preserve confidentiality. In practice, the guarantee of confidentiality indeed plays an important role and is often a pre-condition upon which companies agree to take part in specific instance procedures.
Competence for handling complaints and rights of action
The competent body for handling an NCP complaint is generally the NCP of the country in which the alleged breach took place. However, complaints may also be addressed to the NCP of the country in which the enterprise is headquartered, even if the alleged violations took place in a third country. In practice many cases are located in third countries that do not have an NCP. Generally, any party with a legitimate interest is allowed to submit a case. Since 2011 over two-thirds of the cases have been filed by NGOs and trade unions.
Voluntary character, but certain consequences may be faced
Despite the fact that NCPs are non-judicial dispute resolution forums that cannot force companies to participate in a specific instance procedure, non-participation in NCP proceedings may still have certain negative consequences. In certain countries, such as Germany, non-participation in NCP proceedings will be taken into account during the review of export credit guarantees and investment guarantees. In Canada, companies that do not participate in NCP proceedings may not benefit from economic diplomacy services, such as participation in official trade missions.
Comparison with national court proceedings
In addition to their voluntary character and the fact there are no detailed rules on venue and jurisdiction, NCP proceedings are also typically more flexible than national court proceedings. There are no costs for filing an NCP case and there is generally no statute of limitation. For example, the Dutch NCP concluded a case in 2017 for violations of labour rights in the Democratic Republic of Congo that took place between 1999 to 2003. There is generally also no appeal process.
In 2019, 40 per cent of the cases where NCPS provided “good offices”– i.e. some form of assistance to help the parties resolve their issues, such as mediation – led to an agreement between the parties. Typical outcomes of such agreements include:
- changes to company policies;
- the improvement of due diligence procedures; and
- the continuation of dialogue after the end of the proceedings.
In rare cases, NCP proceedings also lead to financial or in-kind compensation. If no agreement is reached between the parties, the NCP can still provide recommendations to the parties which typically relate to the improvement of company policies. A few NCPs also include determinations on whether a company has followed the Guidelines.
NCP case subjects and case examples
Since 2011, which marks the year in which the human rights chapter was integrated into the OECD Guidelines, the majority of cases have dealt with human rights issues (51 per cent); followed by due diligence obligations (49 per cent); and employment issues (37 per cent). Most cases generally involve more than one chapter of the Guidelines. NCP cases take a variety of different forms that take place in all economic sectors and past cases have not only been addressed against multinational corporations, but also against SOEs, SMEs, sporting federations, multi-stakeholder initiatives and even against NGOs. Child or forced labour, environmental degradation, land conflicts, labour conflicts and workers’ rights, and the rights of indigenous communities are all typical subjects of specific instance proceedings. Many cases are directed against supply chain relationships.
- In recent years, financial sector companies have increasingly been the subject of complaint proceedings for their project finance activities, loan provisions, and also for their business relationships with companies that are involved in controversial infrastructure projects (for example, the building of the Dakota Access Pipeline).
- Another recent case was directed against a financial institution on the subject of climate change impacts because the concerned bank allegedly did not disclose on the greenhouse gasses indirectly emitted through the projects and companies that it finances globally.
- Another case was submitted against an internet service company for environmental violations because the company allowed the advertising of furnaces where it was indicated on its website that they could be used to burn certain hazardous waste.
- A well-known NCP case was held against a sporting federation for human rights violations of migrant workers in connection with the building of facilities for a major sporting event.
- A current NCP case against a telecommunications company deals with the violation of worker’ rights due to inadequate health and safety measures during the COVID-19 crisis.
OECD complaint procedures are increasingly used by complainants who take advantage of their greater flexibility, global reach and cost-efficiency to pursue human rights, social and environmental disputes. Companies operating in all sectors should be aware of the NCP complaints risks that could arise; leading to long and complex proceedings that could also have a negative impact on a company’s reputation.
We currently advise clients on their proceedings before NCPs and on the implementation of any recommendations following the process, learn more about this and our related work here. For further information on the role of NCPs and their proceedings, please also see this report that was published on December 14, 2020, marking the 20th anniversary of the introduction of NCP proceedings.