The OECD Guidelines and the National Contact Points process

On 30 April 2024 and 7 May 2024, Freshfields hosted a two-part webinar series on the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (the OECD Guidelines) and its integrated National Contact Point mechanism. The webinars provided a comprehensive overview of the OECD Guidelines, starting with an introduction to their scope , followed by practical and strategic considerations of what to do if a company finds itself at the receiving end of a complaint made to a National Contact Point. 

Speakers included Simon Squire (Head of Sanctions and Responsible Business Conduct, Trade & Investment Negotiations (Services) Directorate, Department for Business and Trade), Lorand Bartels (Freshfields), Doug Bryden (Freshfields), Cat Greenwood-Smith (Freshfields), Boris Kasolowsky (Freshfields), Iris Hammerschmid (Freshfields). 

The speakers provided an overview of the OECD Guidelines and the 2023 update, presented the due diligence framework of the OECD Guidelines and how the complaints process works in practice across jurisdictions. 

OECD Guidelines

The OECD Guidelines were introduced in 1976 as a non-binding soft law instrument on responsible business practices and have been continuously updated since then (the latest update was published in June 2023). The OECD Guidelines consist of 11 thematic chapters, covering a wide range of sustainability-related topics, including – inter alia – disclosure, human rights, employment, environment, anti-corruption, science&technology, competition and taxation. The OECD Guidelines are supported by an implementation mechanism, the so-called National Contact Points for Responsible Business Conduct (NCPs). The NCPs are responsible for promoting the OECD Guidelines and hearing cases against companies for alleged violations of the OECD Guidelines.

The OECD Guidelines were updated in June 2023 to reflect current global challenges, such as climate change, biodiversity loss and digital transformation. While the previous edition of the OECD Guidelines did not mention climate change, they are now the first internationally agreed standard for how businesses should address climate change. Businesses should ensure that their greenhouse gas emissions and their impact on carbon sinks are in line with internationally agreed global temperature goals based on best available science. The role of the NCPs has also be strengthened with the update of the OECD Guidelines.

UK NCP process

Simon Squire explained how the UK NCP process works in practice and presented the three main phases of a complaint process before an NCP:

• Phase 1 (Initial assessment phase; typical duration 3 months): The aim is to determine whether the issues raised merit further consideration and whether the complaint is accepted. The initial assessment is published on the UK NCP’s website. 
• Phase 2 (Mediation phase; typical duration 6-12 months): The UK NCP offers professional mediation to both parties with the aim of reaching a mutually agreed resolution of the issues raised. If the parties refuse mediation or the mediation fails to reach agreement, the UK NCP will carry out further investigations and make findings on whether the company complies with the OECD Guidelines and issue recommendations. 
• Phase 3 (typical duration 3 months): Following mediation, the UK NCP will issue a final statement, which will then be published on its website. This statement will e.g. include details of the complaint, the chapters of OECD Guidelines to which it refers, the parties involved, a summary of the process, and the UK NCP’s recommendations.

If there are recommendations, Phase 3 is usually followed by a follow-up statement on the implementation of the recommendations one year after the end of the proceedings. 

Trade implications

Freshfields provided an overview of the broader context of the OECD Guidelines, in terms of domestic and international law and global trade implications. It was highlighted that we are currently witnessing an increasing hardening of soft law obligations, particularly in relation to the conduct of human rights and environmental due diligence. Mandatory regimes, such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) or national supply chain laws are often inspired by the OECD Guidelines. Freshfields presented the example of responsible disengagement, as foreseen by the OECD Guidelines and the CSDDD, and showed its legal implications, especially in relation to contractual obligations. The audience was reminded that under WTO law, measures that restrict trade such as the CSDDD and the OECD Guidelines (if they establish an incentive not to trade), may only restrict trade under certain exceptions, such as protection of public morals (which includes human rights) or the conservation of exhaustible natural resources. 

Our Freshfields experts also discussed key trends and types of NCP complaints that can be seen across sectors and how this is shaping wider approach to corporate governance. Speakers presented case studies and gave insights on how to develop a strategic response to an NCP complaint.
NCP proceedings as steppingstone for civil litigation

For companies that find themselves at the receiving end of an OECD complaint, it is important to bear in mind that complainants are often supported by highly experienced NGOs, trade unions, and/or strategic litigation networks. Claimants have discovered the OECD complaints procedure as a free alternative to taking legal action in courts. On the other hand, NCP complaints are also often used as a steppingstone (i.e. precursor) to civil litigation. One example is a complaint by NGOS against the pesticide manufacturer Syngenta before the Swiss NCP for poisoning cases in India. Subsequently, with the support of NGOS, the victims filed a lawsuit in the civil court in Basel. The NCP proceedings are increasingly being used to gather information to prepare and support civil litigation. Respondents are therefore well-advised to think carefully about the content of their response and other documents they disclose during NCP proceedings which are generally also made available to the complainants. 

Why to engage in an NCP process?

The question of why complainants should participate in the voluntary NCP process was also discussed. In addition to serious reputational risks, non-participation could have negative consequences, such as exclusion from public procurement or denial of export credit guarantees in some countries. Non-participation may also be seen by some NCPs as non-compliance with the OECD Guidelines which has to be taken into account in the context of the increasing hardening of soft law obligations. On the other hand, engaging in the process can also be a positive experience, giving a company the opportunity to demonstrate its ESG policies and commitments and the positive contributions it can make in a particular case. 

Mediation phase

With regards to the mediation phase (phase 2), our Freshfields speakers explained that it is important that the scope and parameters of the mediation are carefully agreed in the Terms of Reference before mediation begins.  While NCPs have slightly different procedural rules, confidentiality is generally maintained during the process, but ceases once proceedings are completed. It is therefore important to agree Terms of Reference that provide for confidentiality even after mediation has ended. It is also key to understand the objectives of the complainants, who often use the NCP process to achieve strategic or operational change. 

Interaction of the OECD Guidelines with corporate governance obligations

Freshfields highlighted that the increasing hardening of the soft law obligations of the OECD Guidelines impacts governance and ESG disclosure obligations. Examples of regulations that have been influenced by the OECD Guidelines include the EU Sustainable Finance Disclosure Regulation, the EU Taxonomy Regulation, the Corporate Sustainability Reporting Directive and the CSDDD. For example, the due diligence approach in the CSDDD mirrors the due diligence concept in the OECD Due Diligence Guidance for Responsible Business Conduct. Companies should be aware that statements and disclosures relating to adherence to the OECD Guidelines as part of good governance standards could expose businesses to litigation risk (e.g. shareholder derivative actions for failure to adopt appropriate regimes).