OECD-Guidelines: a chance for more bite

In August 2001 bulldozers razed the village of Tabaco in northeastern Colombia and the residents were driven out. Behind that illegal action was El Cerrejón, the world's largest open-pit coalmine. It is one-third owned BHP Billiton (Australia), Anglo-American (United Kingdom) and Xstrata (Switzerland) respectively.

In the light of this expulsion the Swiss-Colombian Working Group (ASK) filed a complaint in October 2007 with the Swiss Contact Point, which is responsible for upholding the OECD guidelines. In parallel, a complaint was also brought against BHP Billiton in Australia. The aim was to create a balanced and transparent negotiating framework for the affected indigenous community (Afro-Colombians) and to find a solution that afforded them dignified living conditions.

Makeshift job instead of lasting improvements

The Australian Contact Point assumed the leadership. The procedure lasted until June 2009 and was complex and frustrating for the displaced village community. The complaints did indeed generate international pressure and forced El Cerrejón to agree to a review of its social policies and to negotiate an agreement with the displaced people. Yet the implementation of the agreement remains flawed, the situation of the displaced people has hardly improved, and they are not being adequately compensated. The reconstruction of the village at another site is yet to materialize. Moreover, four other communities are now under threat from El Cerrejón.

The complaint against Xstrata was not the first to be filed in Berne. Since 2001, 12 complaints have been lodged with the Swiss Contact Point and Switzerland took the lead in eight cases. The last complaint still pending to date is that against the underwear manufacturer Triumph on account of mass dismissals in Thailand and the Philippines. Most of the others have been over trade union conflicts at Nestle subsidiaries. The El Cerrejón/Xstrata case is special in that it concerns indigenous communities that do not have the support of an international trade union. This makes it all the more emblematic of the shortcomings of the OECD Guidelines, which have come in for criticism from the NGO network OECD Watch and the UN Special Representative for Business and Human Rights, John Ruggie.

Business-friendly and untransparent

One first flaw is that the national Contact Points are often not independent. In Switzerland, it is located at the Office for Investment Promotion of the State Secretariat for the Economy (Seco) and is not accountable to the parliament. Conflicts of interests are thus pre-programmed, as El Cerrejón shows. «The case was closed without Seco having brought any pressure whatsoever to bear on the company», says Stephan Suhner of ASK, who was spearheading the complaint. «The Contact Points in Switzerland and Australia have basically given credence to the scant information supplied by the companies, although the latter were hardly cooperative. They scarcely took note of the detailed reports from the affected communities.»

A second problem is that the procedure is untransparent and protracted, and even more so when, as in the El Cerrejón case, several countries are involved. Third, the Contact Points often confine their role to encouraging dialogue and their final reports are hardly meaningful. They invoke for that the voluntary nature of the Guidelines. Stephan Suhner has voiced the criticism that in the case of El Cerrejón, the Seco Contact Point acted rather passively and refused to hear the affected people or to insist that Xstrata take a stand on the proposed solutions. «Alleging a lack of resources, Seco has rejected all proposals from the complainants: any further meetings with the firm, on-the-spot investigations, or arbitration proceedings.» Besides, no steps were taken to monitor the implementation of the agreement between the mine and the village community.

Holland and Great Britain as trailblazers

The weaknesses lie not only in the shortcomings of the guidelines, but also in the lack of political will. Some countries are much more committed in their approach and are better organized. For example, 11 of the 42 signatory states have included two or more government offices in their Contact Points; 12 have taken on board other stakeholders such as business associations and NGOs.
Three years ago, the NGO network OECD Watch put forward a model in the form of an independent, multistakeholder Contact Point. The United Kingdom and Holland took inspiration from it. The British contact point was thoroughly reformed and is today being run by two offices (development cooperation and business promotion). It reports to a steering group that includes representatives from the parliament, trade unions and NGOs. Similar to courts, it publishes detailed final reports setting out any infringements of the Guidelines. As a pilot project, Holland has launched a Contact Point consisting mainly of independent experts and which also carries out on-the-spot investigations.

Homework for the Swiss Federal Cabinet

These initiatives may not be perfect, but they do illustrate one way in which the unsatisfactory situation can be improved upon. Switzerland would do well to take an example from this. As home to an above-average number of multinational enterprises, it faces a special challenge: after all, Switzerland's direct investments abroad amounted to 732 billion dollars at the end of 2009.  On a per capita basis, Switzerland thus ranks second behind Hong Kong.
The review of the OECD Guidelines presents the Federal Cabinet with an opportunity to make improvements to the Contact Point. In future it should be led by an interdepartmental office consisting not only of Seco, but also Political Division IV (Human Rights) of the Department of Foreign Affairs, the Swiss Agency for Development and Cooperation (SDC), with the participation of business associations, trade unions and NGOs. It should be accountable to the parliament and have sufficient resources to make on-the-spot investigations, provide arbitration services and monitor the implementation of the agreements. Lastly, in all cases of complaints, it should produce a substantive final report that sets out clear recommendations and identifies any infringements of the Guidelines.

Michel Egger, Alliance Sud
Further reading: OECD Watch

Article published in: Alliance Sud News No. 64, Summer 2010

Box

Four reform proposals

The formulation of the OECD Guidelines for multinational enterprises is general and flawed. The review began in June and provides an opportunity to improve on them and better regulate the activities of multinationals that have social and environmental impacts.
Alliance Sud is of the view that the Federal Cabinet should promote four reforms in particular:

• A special chapter on human rights is needed that incorporates the concept of due diligence formulated by the UN Special Representative for Human Rights, John Ruggie. Due diligence binds companies to look into the possible negative human rights implications of their activities in order to avert them or eliminate any abuses

•  the validity of the Guidelines should be extended to all suppliers and subcontractors.

• accounting must be made more transparent and tax manipulations avoided, by requiring multinationals to do country-by-country reporting.

• procedures in the event of complaints should be structured such that those affected can play a more active part in the process and fair and transparent proceedings are guaranteed.

Michel Egger, Alliance Sud

Box published in: Alliance Sud News No. 64, Summer 2010