Part 7: The Emerging Ideological Framework of the US National Contact Point.
This series builds on some ideas I have been working through for a number of years relating to a fundamental shift in the approaches to corporate governance that broaden the ambit of corporate governance issues from a singular focus on internal governance (the relationships among officers, shareholders and directors) to one that includes corporate behavior and the standards by which officers, directors and shareholders exercise their respective governance authority. This shift also changes the scope of what is understood as "law" to be applied to issues of corporate governance, from one principally focused on national law to governance norms that may be sourced in the declarations and other governance interventions of public and private international bodies. Lastly, it appears to point to an evolution to the role of the state from the principal source of standards and enforcer of law to a vehicle for the implementation of international standards in which enforcement power is left to global market actors--principally consumers and investors function of the decisions of global actors. All of this is inconsistent with traditional notions of the role of law, the scope of corporate governance and the nature of corporate social responsibility int he United States. The extent to which the United States participates in the construction of these autonomous international systems may suggest the direction in which government policy may be moving away from the traditional consensus of corporate responsibility to something perhaps entirely new.
This post focuses on the self conception of the U.S. National Contact Point under the OECD Guidelines for Multinational Enterprises (2011) (MNE Guidelines). Subsequent posts will consider the American National Contact Point within the context of the NCP system and note the divergence of the US approach to that of important European counterparts by considering its specific instance jurisprudence.
Part 7: The Emerging Ideological Framework of the US National Contact Point.
The last post sketched out the institutional structures of the U.S. NCP and its place within the U.S. governmental architecture. One of the more significant points of that discussion was the substantial changes in the role of the U.S. NCP since 2010. That change was rooted in a substantial revision of the ideological premises and the resulting policy of the U.S. government, with respect to the U.S. engagement with the MNE Guidelines and the role of the U.S. NCP. This post briefly considers that ideological shift through the words of government officials who participated in that movement.
The change in approach was signaled at the highest levels by then Secretary of State Hillary Clinton, when she addressed the OECD on the commemoration of the 50th anniversary of the OECD (Hillary Rodham Clinton, Commemoration of the 50th Anniversary of the OECD, Remarks On Guidelines for Multinational Enterprises, Paris, France, May 25, 2011).
The foundational themes emerge easily here. First the understanding of the MNE Guidelines as occupying a unique space. But that unique space is not one between domestic and international law, nor is it one that helps define the governance universe of multinational corporations beyond public law. Rather, Secretary Clinton expresses the conventional view that the MNE Guidelines serve to guide the development of a species of corporate governance--corporate social responsibility. It does this by providing a framework for the management of consensus on corporate behavior through international public bodies, which may then be projected down to corporate behavior and across to transposition into the domestic legal orders of states. It is less the MNE Guidelines themselves than the effectiveness of the global policy network in action that is of most utility to adhering states. The rest is politics.SECRETARY CLINTON: Next, we turn to the OECD New Guidelines for Multinational Enterprises. For over 35 years, these guidelines have occupied a unique space within the world of corporate social responsibility. They are the only ones formally endorsed by governments, 42 at last count. And they do bring together labor, civil society, and business to create the broadest possible consensus behind them. This is truly the work of a global policy network in action.
This year’s updated guidelines include an important new chapter on human rights, drawing on the work of UN Special Representative John Ruggie. These guidelines help companies ensure their dealings with third parties do not cause or contribute to human rights violations.
And let me now invite those who will be formalizing this very important step forward, because after all, if you look at these guidelines, they will be helping us determine how supply chains can be changed so that it can begin to prevent and eliminate abuses and violence. We’re going to look at new strategies that will seek to make our case to companies that due diligence, while not always easy, are absolutely essential. . . .
And I was particularly pleased to see a recommendation that businesses act as partners in promoting a free and open internet. We’ve seen the results of what happens when we see repression being exercised on the internet, so this is a very big step forward.
The countries adhering to the Declaration on International Investment and Multinational Enterprises are all OECD members, plus Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru, and Romania, adopting the amended Guidelines for Multinational Enterprises.
The OECD Council now adopts the amended decision on the OECD Guidelines for Multinational Enterprises. And here I note that Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru, and Romania adhere to this decision.
Second, the acknowledgement of the work of John Ruggie and the incorporation of the U.N. Guiding Principles on Business and Human Rights provides a substantive nudge in the right direction. The "drawing on" language, taken from the incorporation, of course, is somewhat troubling. It suggests something short of incorporation into the MNE Guidelines, and thsu the possibility of divergence in interpretation and application between the UN Guiding Principles and the MNE Guidelines. But for the moment that may be unlikely--except by the United States.
That little barb brings us to the the third theme. For the United States, the utility of the MNE Guidelines, and its partnership with the structural framework of the UN Guiding Principles, is outward looking and not inward looking. The focus on the disciplining of supply chains is telling in this respect. In effect, Secretary Clinton adopts a view, increasingly current in developed states, that has transformed the discourse of extraterritoriality from one in which states project their own domestic legal orders to subordinate states to one in which powerful states project international standards (whether or not binding as a matter of law) into less developed states. This is discussed exceptionally well in the writing of Professor Sara Seck (discussed in Sara Seck on the Possibilities and Limits of Extraterritoriality in a Corporate Social Responsibility and Human Rights Context). This form of projection has two distinct consequences. First it opens the way for home state courts in developed states to adjudicate conformity to standards in the conduct of enterprises in host states; this is an opening that can also facilitate similar forms of non-judicial proceedings in home states. Second, it provides a vehicle for reforming the domestic legal orders of developing states along the lines of these developing international standards that have been endorsed by the more powerful group of developed states.
Last, the fourth theme centers on the disciplinary function, and its utility for enterprise transparency (and ease of public regulation), in the form of systems of due diligence. It is not for nothing that Secretary Clinton focuses her remarks on both the due diligence architecture of the Guiding Principles now transposed to the MNE Guidelines. But she also makes a point of connecting enterprise behavior principles with the openness and transparency principles inherent in the preservation of the unregulated Internet. This has been an important political line of the U.S. for a number of years and reflects the insight, developed to a fine point after the Second World War, that information serves both market and political purposes. Applying principles of market openness to information flows thus provides a double benefit to the U.S.
The themes developed by Secretary Clinton are more precisely developed by Gregory Maggio, in his role as Special Advisor, U.S. OECD National Contact Point Team. (Gregory Maggio, Remarks: The Contribution of National Contact Points in furthering the Responsibility of Business to Respect Human Rights, delivered at Conference--National Contact Points and the Extractive Sector, London, United Kingdom, March 23, 2012). His articulation of the State Department's view on the corporate responsibility to respect human rights is worth reproducing in full:
The State Department's View on the Responsibility of Business to Respect Human RightsThere are two points made by Mr. Maggio that bears stressing. The first is the understanding by the United States of the autonomy of the corporate responsibility ot respect human rights. It is clear that the U.S. government understands that the corporate responsibility is grounded in governance norms that may be different, and perhaps inconsistent with, law in general and United States law in particular. That is a small but important concession to polycentricity. It is small because international governance structures would not be entitled to the same dignity as law within the United States. It is important because it suggests a principled basis for applying to the actions of multinationals a standard of conduct for its overseas activities that is different from the expectations of corporate conduct within the United States. That is consistent with both U.S. policy and the ideology of the OECD; but it is not necessarily the premises underlying the Guiding Principles. But this concession is understood to put enterprises in an impossible position when local law and the MNE Guidelines standards are inconsistent. But of course, it is precisely in those cases, especially in weak governance zones, that home state extraterritoriality--projecting the substantive norms of the MNE Guidelines into such weak governance zone states--becomes an important regulatory device.
Now, let me provide an overview of State Department perspectives on the responsibility to respect in relation to the policies and operations of businesses and their stakeholders.
As we know, human rights law generally imposes obligations on States.
However, companies also have an important role to play in the context of the exercise and enjoyment of human rights.
Secretary Clinton's Economic Statecraft agenda recognizes that around the world "economic forces are transforming foreign policy realities" in ways beyond what might have been imagined only a few decades ago.
She also recently noted: “This administration understands that in the 21st century, governments are not the only major players. Corporations, NGOs, private citizens, and civil society groups shape events and developments across the globe. The United States Government wants to be your ally and your partner – so we are all working together to make human rights a reality in the places where you do business.” [Secretary of State Hillary Rodham Clinton, remarks to the 11th Annual Plenary Meeting of the Voluntary Principles on Security and Human Rights, State Department, March 2011]
This need for governments and businesses to cooperate to address human rights and other issues is grounded in the facts of this increasingly integrated world, where more than one-third of the 100 largest economic actors today are private companies, not countries.
Extractive companies operate in some of the most complex environmentally, socially and politically sensitive locations, where governments may lack the capacity, disposition, or an adequate legal framework to enforce the law.
A key objective for National Contact Points is to offer opportunities to assist businesses to put into practice the responsibility to respect human rights, and to raise awareness about implementation of the Guidelines with business, non-governmental organizations and other stakeholders.
As we are well aware, this responsibility exists independently of States’ abilities or willingness to fulfill their own human rights obligations to their people.
John Ruggie’s development of the UN Guiding Principles on business and human rights constructed a roadmap for the way forward. Professor Ruggie's work was critical in building consensus around the responsibility of business to respect human rights.
My Government welcomes that the human rights chapter of the 2011 OECD Guidelines draws upon and is in line with the UN Guiding Principles.
The articulation of the responsibility to respect in the OECD Guidelines further affirms international recognition of the Guiding Principles, along with the Guidelines, as a widely accepted framework for how companies, governments and other stakeholders can cooperate to develop strategies and achieve solutions for furthering respect for human rights.
It should also be noted that the American Bar Association formally endorsed both the Protect, Respect and Remedy Framework articulated in the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises.
Now I'd like to underscore a basic point: Complying with local law may not, on its own, suffice to ensure that companies avoid the full spectrum of human rights-related risks.
As the OECD Guidelines recognize:
"Respect for human rights is the global standard of expected conduct for enterprises, independently of States' abilities and/ or willingness to fulfill their human rights obligations and does not diminish those obligations.”
Of course, realizing this objective can present formidable challenges for companies and their stakeholders, depending on the circumstances in which they are operating.
Secondly, and more importantly, it is clear that the United States understands that the NCP is not to be constructed as a quasi-judicial organ, and that, as a consequence, the MNE Guidelines are not to acquire the functional effect of law within the United States. The "key objective for National Contact Points is to offer opportunities to assist businesses to put into practice the responsibility to respect human rights, and to raise awareness about implementation of the Guidelines with business, non-governmental organizations and other stakeholders." (Ibid).) The focus is on managing enterprise behavior; it is not on providing a forum for non-state actors to press their own views of the application of MNE standards (and their breach) through programs of quasi-litigation. But the door to specific instance activity is not completely closed. Mr. Maggio notes: "I’ll just briefly say that the Specific Instance process also has the potential to play a constructive role in fostering greater awareness and understanding among businesses and stakeholders in relation to concrete issue-based situations, about effective observance of the Guidelines." (Ibid.).
One way to work toward that objective, a litigation avoidance objective, is through stakeholder engagement, that is through the publicity and awareness campaigns of the U.S. NCP. The other, and perhaps more important means of fulfilling this goal is through technical assistance in the development and implementation of Guiding Principles based human rights due diligence: "We believe that NCPs could play a much more active role in helping companies implement more effectively human rights due diligence, including how to undertake robust stakeholder engagement."(Ibid.). Lastly, the NCP would implement a Proactive Agenda. The "the Proactive Agenda is a relatively new tool, which NCPs and stakeholders could find to be a creative and constructive avenue for substantially enhancing business' implementation of the responsibility to respect human rights." (Ibid.). The utility of the Proactive Agenda is to enhance consultation and cooperation between enterprises and non-state actors. Mr. Maggio speaks of its use to "offer a safe space for all parties to meet and deliberate over options-- such as lessons learned, and best practices -- including from the concrete experiences of other companies and stakeholders-- regarding what has worked and what has not been successful." (Ibid.). But its principal use could be to build knowledge bases and provide a source of technical assistance--and socialization in consensus based norms. Mr. Maggio speaks of a "a core repository of knowledge on new-thinking, and information sharing on cutting-edge research in relation to the experiences of existing mechanisms, such as the Compliance Adviser Ombudsman at the International Finance Corporation, that are also focused on fostering respect for human rights in their problem-solving and related work." (Ibid).