Saturday, October 09, 2010

OECD Guidelines for Multinational Enterprises – What every international lawyer needs to know about possible upcoming changes

I recently wrote about the International Bar Association Corporate Social Responsibility Section's excellent program: Corporate Social Responsibility at the International Bar Association Annual Meeting in Vancouver, Canada.

John Sherman and Craig Phillips, Co-Chairs of the International Bar Association corporate Social Responsibility Committee organized the panel, OECD Guidelines for Multinational Enterprises – what every international lawyer needs to know about possible upcoming changes, on which I participated. The panel description gives a good idea of the scope of discussion:

Are the OECD Guidelines for Multinational Enterprises still relevant to today’s global economy? Do they provide adequate guidance to companies? Does their complaint process work? What are the proposals for their reform? This session will attempt to answer these and other questions.
The Guidelines were last revised in 2001, and cover a wide range of business conduct in such areas as disclosure, employment, environment, anti-corruption, consumer interest, science and technology, competition and taxation. They are now being scrutinised for changes in response to concerns that they are outdated and don’t reflect the concerns of the current global economy in a variety of areas, including human rights, supply chains, distance selling, climate change, and anti-corruption, among others. In addition, National Contact Points (NCPs) – appointed in each OECD country to resolve allegations that companies have violated the Guidelines – have been criticised as underutilised and ineffective.

An IBA Working Group has submitted comments both to the UK NCP and to the OECD to revise the Guidelines and improve the NCP process. Other groups, including business, labour, and civil society, have filed their own comments.
The panelists included: Janine Elliott former Senior Legal Counsel at Shell International Limited, London; Rodrigo Muñoz of the law firm of Nuñez Muñoz & Cia Ltda Abogados, Santiago Chile; Martijn Scheltema, of the law firm of Pels Rijcken & Droogleever Fortuijn NV, Gravenhage, Netherlands; Edward J. Waitzer of the law firm of Stikeman Elliott LLP, Toronto, Canada.  John Sherman moderated and presented a set of introductory materials on the OECD framework for multinational corporate governance.
A summary outline of some of the following presentations are provided below:

1. John Sherman, OECD Guidelines Revisions.

2. Larry Catá Backer, Coherence in Governance System for Multinational Corporations: The OECD Guidelines for Multinational Corporations, the National Contact Points, Corporate and Stakeholder Actors Between Public and Private Spheres.

3.  Edward J. Waitzer, Speaking Notes

3. Martijn W. Scheltema, Introduction on NCP dispute settlement.

4.  Panel Bios. 


OECD Guidelines Revisions
John Sherman

I.  What is the OECD

A.  History
B.  Membership
C.  Objectives

II. What are the OECD Guidelines
A.  Voluntary, not mandatory
B.  Shared expectations of business conduct
C.  Applies wherever MNEs operate

III:  What do they cover?
A.  Disclosure
B. Employment and industrial relations
C.  Environment
D.  Combating Bribery
E. Consumer interests
F. Science and technology
G. Competition
H. Taxation

 IV.  How are they interpreted and applied?
A. National Contact Points
B. "Functional Equivalence"
C. "Specific Instance"

V.  Why are they being revised? 
 A. Last revised in 2000
 B. NCP process criticized as inaccessible, inconsistent, not transparent, unfair, without consequence, etc.
C. Only one sentence on human rights
D. UN "Protect-Respect-Remedy" framework on business and human rights (2008).
i. enjoying wide uptake globally by countries, companies and civil society

VI.  What is the "Protect-Respect-Remedy" Framework?
 A.  State duty to protect against human rights abuses by third parties.
 B. Corporate responsibility to respect human rights, which means to act with due diligence to avoid infringing on human rights.
C. Need for greater access to remedy by victims, including non judicial remedy.

VII.  What's Human Rights Due Diligence?
A. Top commitment.
B. Impact assessments.
C. Integration.
D. Tracking and reporting on performance.

VIII. What's the IBA's Role?
A. IBA Working Group submittals to to UK (2009) and OECD (2010).
B. Supported adding chapter on human rights, consistent withUN Framework.
C. Made numerous other content suggestions (climate change, anti-bribery, etc.).
D. Urged reform of NCP process.

IX. References and links.

A. OECD Multinational Enterprises Guidelines (2000).
B.  UN Protect, Respect, Remedy Framework (2010).
C.  IBA Working Group Submittal to OECD (2010).

Coherence in Governance System for Multinational Corporations: The OECD Guidelines for Multinational Corporations, the National Contact Points, Corporate and Stakeholder Actors Between Public and Private Spheres
Larry Catá Backer

The presentation looks to the systemic effects of recent U.K. National Contact Point decisions (with an eye to the project of OECD revisions of the Guidelines for Multinationals). I will be considering the way in which the emerging actions of the NCPs contribute to the creation of a coherent jurisprudence with the assumption that Ed may be looking more closely to the substantive issues that are touched on by the Guidelines and the cases.

I. Introduction
A. Brief overview of NCP system within context of Guidelines
B. Thesis—jurisprudence suggests the construction of a coherent governance framework that may serve as the foundation for customary principles of behavior  
C. Consequence: lawyers are now facing the emergence of multiple sources of law on the basis of which company transactions and relationships can be challenged simultaneously in multiple jurisdictions each with potentially distinct soft and hard law standards.
D. This will require lawyers to recognize their role in counseling clients with respect to corporate obligations under two distinct governance frameworks--those of the domestic legal orders  of home and host states, and those of transnational governance orders that can affect the functional operation of corporate entities.
II. The cases and their respective contributions.
A. Supply Chain liability and public obligations in weak governance states
DAS Air  
B. Multiple Law Sources (Polycentricity); autonomous obligations arising under Guidelines Framework and under national law (supplementary or inconsistent obligations?). 
T&G Peugeot
Rahim Yar Khan

C. Appeals; process rather than substantive focus
BTC Pipeline

D. Inducement to Settle, Current and Prior Procedure; strategic use of Guidelines 
Anglo American

III. Drawing the Pieces Together
A. Governance themes emerging
1. Polycentricity and standing
2. Supply chain responsibility
3. Direct application of human rights instruments (entities as subjects of international law)
B. The Problem of Sources of Governance
1. External sources for internal governance
2. Ruggie Protect-Respect-Remedy Principles
3. Norway SWF and other CSR motivated institutional investors.
C. Institutional Elements
1. Role of the NCP
2. Role of Civil Society Stakeholders
3. Transparency, mediation and dispute Resolution
4. Role of investment community
–Sovereign Wealth Funds as indirect governance element
–Institutional investors and investment media as influential managers of public consensus
IV. Looking Foreword
A. Guidelines Revisions
•Make it easier to invoke procedure; issue of asymmetric availability among OECD members
B. NGO interventions
•implications of broadened standing
•Role in developing common standards within NCP system
C. Disclosure implications
•risk management and implications for financial disclosure
D. Strategic implications: uses as part of a multi-jurisdictional multi-forum strategy (courts, NCPs).
•Suggest the possibilities of a coordinated litigation-mediation-conflict strategy by non-shareholder stakeholders
•Vedanta: use of NCP procedure to put pressure on host state;
•Sewri, Khanewal: use of NCP procedure to put pressure to settle beyond requirements of host state law requirements.
V. Conclusion
A. Coherence or wishful thinking?

B. Coupling with other governance norms—interlocking systems or communication?

C. Forms of dispute resolution—mediation and its transparency implications. D. Role for Lawyers changing and broadening from formal law to governance and its implications for business relationships and liability exposure.

The PowerPoint presentation may be accessed here.

For further reading, see, e.g.,
1. Backer, Larry Catá, Rights and Accountability in Development (Raid) V Das Air and Global Witness V Afrimex: Small Steps Toward an Autonomous Transnational Legal System for the Regulation of Multinational Corporations, 10(1) Melbourne Journal of International Law 258 (2009);

2. Backer, Larry Catá, On the Evolution of the United Nations’ 'Protect-Respect-Remedy' Project: The State, the Corporation and Human Rights in a Global Governance Context (June 3, 2010). Santa Clara Journal of International Law, Vol. 9, No.1, 2010.

3. Backer, Larry Catá, Private Actors and Public Governance Beyond the State: The Multinational Corporation, the Financial Stability Board and the Global Governance Order (August 13, 2010).


IBA Annual Meeting 2010
Corporate Social Responsibility Committee:
OECD Guidelines for Multi-National Enterprises
Edward J. Waitzer
Speaking Notes

A. Problems with Current Governance Literature/Standards
(1) Governance isn’t a checklist, nor perfectible

(2) Governance standards/literature tend to be air sandwiches - empty in the middle

(3) There is an overriding sense of fatigue (even as more resources invested, distrust arises)

(4) Dumbing-down complexity to complication

(5) It’s all about values (e.g., Greece, Goldman Sachs)

B. Why we may be at an inflection point
(1) Traditional tension between corporate law (risk shifting instrument) and general tort law principles no longer works

(2) Opportunity created by crisis

(3) General renaissance in desire to discuss what values in business should be

C. Ways to get there
(1) Disclosure (as a process rather than output)

(2) Reconnecting process and purpose (e.g., integrated policies)

(3) Oppression remedy (based on (i) reasonable expectations (ii) unfairly disregarded)

(4) Stakeholder theory leading to shift towards trust law (or equivalent legislation)

(5) New institutional structures for business

(6) Moral stakeholder theory

(7) Obligation to act reasonably Enhanced duties


Introduction on NCP dispute settlement
Martijn W. Scheltema
A) National contact points (NCP’s) are instituted by local governments which are OECD-member

(i) part of government (in many instances as a part of the ministry of trade or business development)

(ii) except from Dutch NCP (at arms length of government) and UK NCP which outsources its mediation function to independent alternative dispute resolution professionals

B) role of NCP:
(i) assess compliance with OECD guidelines

(ii) dispute resolution (mediation) by government officials (exception: Dutch and UK NCP)

C) supplementary mechanism (besides company-level grievance mechanisms (responsibility to respect human rights) and other mechanisms (local proceedings (e.g. based on foreign direct liability or responsibility for foreign subsidiaries) or arbitration)
(i) not available in all CSR-disputes; an ‘investment-nexus’ is needed
(a) this means there has to be a connection with a foreign investment by a (multinational) enterprise (MNE)

(b) e.g. supply chain conflicts and the provision of means from financial institutions do not have an investment nexus (at least uncertain as financial institutions are involved), but this does not mean that CSR issues cannot rise in such relationships; but NCP have rejected such claims

D) the dispute settlement mechanism appears adequate as an investment-nexus exists
(i) the advantage is this dispute settlement mechanism is restricted to compliance with the OECD-guidelines (therefore no problems with local law and regulations and the enforcement of these regulations arise)

(ii) in many instances relative quick procedure and with experienced mediators
E) there are many CSR-related disputes but this mechanism is not often used (5 cases out of 85 until January 2010)

(i) company level grievance mechanisms exist (especially human rights; framework of John Ruggie (legitimate, accessible, predictable, equitable, rights-compatible and transparent)

(ii) because of disadvantages
(a) lack of confidentiality (when the parties involved do not reach an agreement the NCP issues a statement whether in their view the OECD-guidelines are violated), this statement is made public (and sometimes communicated to the parliament (Netherlands)), transparency and visibility as is required by the OECD procedures is therefore sometimes difficult to align with confidentiality

difficult because there is a need to attach serious consequences to NCP decisions and to monitor compliance with decisions and recommendations (relevant organizations and individuals may assist when the decision and recommendations are made public)

(b) issues of impartiality (because the mediators are government officials and especially when part of the ministry of trade in favor of trade activities; and no or little communication with government entities charged with assuring the country’s protection of human rights; mixed messages to MNE’s)

(Australian prison case, where government itself was involved)
(c) defining investment-nexus is sometimes difficult, therefore it is not always apparent whether a NCP has jurisdiction
possibility of parallel proceedings or litigation for the complaints lacking investment nexus
(d) the lack of clear procedural rules and different (procedural) approaches by NCP’s in OECD-member countries; very little, if any information provided on how the NCP process is used

(e) fundamental problem of neutral conciliation versus authoritative evaluation (i.e. being supervisor (on obedience of OECD-guidelines) and mediator at the same time); better to separate those two functions (e.g. Advisor Ombudsman to the World Bank)

(f) no external review by e.g. NGO’s or other stakeholders (except Dutch NCP which has conducted a peer review by external stakeholders and UK NCP which has a steering board with external members)

(g) no (formal) rules on filing complaints and no timelines (except Australian NCP which recommends 30 days for initial assessment phase and 90 days for second mediation phase and UK NCP which has procedures for handling specific instances within a 12-month time frame); sometimes NCP have taken month or even a year to notify the complainant of the outcome of an initial assessment

(iii) conclusion is the NCP’s contribute to the solution of CSR-problems, but there is a need for an additional CSR-dispute settlement facility with the following features
(a) one worldwide facility (no more differences between NCP’s)

(b) clear procedural rules (e.g. on filing complaints and timelines)(cf. International Labour Organisation Administrative Tribunal (ILOAT), World Bank Administrative Tribunal (WBAT))

(c) jurisdiction in all CSR-related issues (not restricted to investment nexus), as long as a bona fide claim is made

(d) independent from local government

(e) confidential proceedings unless otherwise agreed on by parties (public final statement as a remedy on breach of the agreement?)

(f) experienced mediators from all over the world

(g) seat of the mediation is determined by parties (the mediation facility has a permanent secretariat which supports the mediations, but the mediations do not have to take place at the secretariat)

(h) external review by stakeholders and/or steering board

(i) certification procedure that would provide a certified MNE with a rebuttable presumption of compliance?

Rodrigo Munoz
Núñez, Muñoz y Cía. Ltda. Abogados
Av. Isidora Goyenechea 3250, Piso 13.
Las Condes, Santiago, Chile.
Tel. (56 - 2) 431 9040  A. 102
Fax (56 - 2) 378 8060
Web site:

Mr. Muñoz graduated from University of Chile School of Law (1988).  He holds an MBA from the Catholic University of Chile (1999) and has pursued postgraduate studies at New York University, 1997-1998, including a Certificate in International Transactions and Finance (1997) and a Certificate in Foreign Exchange (1998).

Mr. Muñoz has broad expertise in matters such as joint venture transactions, project finance in the mining industry, mining due diligences, mergers and acquisitions in the mining field.  He has represented both local as well as international mining companies.

He is currently a member of the Chilean Bar Association, International Bar Association, Rocky Mountain Mineral Law Foundation and the Prospector and Developers Association of Canada, in addition to having been recently ranked among the top Chilean mining lawyers by Who’s Who Lawyers 2011.

Larry Backer
Professor of International Affairs
Pennsylvania State University
239 Lewis Katz Building
University Park, PA 16802
1.814.863.3640 (direct), 

Larry Catá Backer: W. Richard and Mary Eshelman Faculty Scholar & Professor of Law, and Professor of International Affairs at the Pennsylvania State University (B.A. 1977 Brandeis University; M.P.P. 1979 Harvard University Kennedy School of Government; J.D. 1982 Columbia University). Professor Backer is a member of the American Law Institute (ALI), the European Corporate Governance Institute (ECGI), and a founding director of the Consortium for Peace and Ethics, a policy NGO.  His research focuses on issues of globalization and governance issues where public and private law systems converge. He is particularly interested in the relationship of socialist systems to globalization, with particular attention to issues of human rights and corporate social responsibility.  He has published a casebook, "Comparative Corporate Law," an edited collection of essays, "Harmonizing Law in an Era of Globalization," and a number of articles on transnational corporate governance and public law.  He is completing a book, “Corporate Governance, Financial Markets And Development” and a casebook, “Transnational Law and Legal Issues.” Additionally, shorter essays on various aspects of globalization and governance, and the role of human rights frameworks therein, appear on his essay site, “Law at the End of the Day,” Professor Backer CV may be accessed here

Edward J. Waitzer
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto ON M4l 1B9

Mr. Waitzer was Chair of Stikeman Elliott from 1999 to 2006 and is a senior partner whose practice focuses on complex business transactions. He also advises on a range of public policy and governance matters. He served (1993-1996) as Chair of the Ontario Securities Commission (and of the Technical Committee of the International Organization of Securities Commissions) and (until 1981) as Vice- President of The Toronto Stock Exchange. He has written and spoken extensively on a variety of legal and public policy issues and serves or has served as director of a number of corporations, foundations, community organizations, editorial boards and advisory groups. Former Falconbridge Professor of Law at Osgoode Hall Law School, he currently holds the Jarislowsky Dimma Mooney Chair in Corporate Governance and is Director of the Hennick Centre for Business and Law at Osgoode Hall and the Schulich School of Business at York University. Earned his LL.B. (1976) and LL.M. (1981) from the Faculty of Law, University of Toronto. Called to the Ontario (1978) and the New York (1985) Bars.

Janine Elliott

Janine Elliott was Senior Legal Counsel at Shell International Limited in London where she was global legal focal point for, among other things, CSR issues in the Downstream Businesses. Janine has kindly agreed to speak to us today about a Complaint she worked on prior to her retirement from Shell earlier this year. The Complaint took three years to conclude and during that time several difficult legal issues arose. Janine’s experience provides insight into practical legal issues that can be encountered when responding to a Complaint. This session will be of particular interest to legal practitioners who may be asked to draft a Complaint, assist an NCP or help steer a multinational enterprise through the Complaint Process – and provide food for thought to those who are working on the Update to the Guidelines.

Martijn Scheltema
Pels Rijcken & Droogleever Fortuijn
The Hague
Pels Rijcken & Droogleever Fortuijn N.V.
Postbus 11756
2502 AT The Hague
The Netherlands
Telephone +31 (0)70 515 30 00
Fax +31 (0)70 515 31 00

Since joining Pels Rijcken in 1997, Martijn Scheltema has dealt with all facets of private law in relation to the public sector, including the role and function of legal entities charged with statutory tasks, contracts concluded with the government, unlawful and lawful government acts and expropriation. As a supreme court lawyer, he deals with a wide range of procedural matters, and has a particular interest in arbitration and the ensuing setting aside proceedings. He has been involved in a number of defining cases in this area. His field of work includes international dispute settlement in relation to corporate social responsibility. As chair of the IP practice group, Martijn deals with a great many aspects of copyright law, law of databases, trademarks and designs, and patent law in relation to ICT and other areas as well. In that context he advises and litigates for government bodies and a number of prominent commercial and non-commercial organisations. He has held many teaching appointments, he has been a member of the editorial staff of professional journals and a committee member of lawyers' associations.

John F. Sherman, III
Sr. Fellow, Center for Business and Government
Harvard Kennedy School of Government
Cambridge, Mass.  USA

Staying at West End Guest House
1362 Haro Street
cell:  617-240-0832

John is a Senior Fellow at the Mossavar-Rahmani Center for Business and Government at the John F. Kennedy School of Government at Harvard University, where he is working to progress the mandate of Prof. John Ruggie, the Special Representative of the Secretary General of the United Nations on business and human rights. 

John retired in 2008 as deputy general counsel of National Grid, where he was its top US lawyer for litigation, safety, health and environmental law, and had executive responsibilities for business ethics, corporate governance, enterprise risk management, and corporate responsibility.  At National Grid, he represented the company at the Business Leaders Initiative on Human Rights (BLIHR), and was a member of the Executive Advisory Board of the International Institute of Conflict Prevention and Dispute Resolution. 

John is a co-chair of the Corporate Social Responsibility Committee of the International Bar Association, a member of the UN Global Compact Human Rights Working Group, and an Executive Fellow at the Center for Business Ethics at Bentley University.

John has written and lectured frequently to international business and legal audiences on business ethics and corporate responsibility.

John is a graduate of Harvard Law School and Dartmouth College, and lives in Brookline, Massachusetts, USA.  He can be reached at

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