Environmental harm and the OECD NCP complaints process:the road increasingly travelled
Challenging corporate behaviours by way of complaints – to OECD National Contact Points for Responsible Business Conduct (“NCPs”) – alleging breach of the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (“the Guidelines”) has become ever more popular.
Complaints to NCPs relating to environmental standards have been diverse. For example, they have alleged misleading advertising, deforestation links in supply chains, failures of due diligence and community engagement in relation to an oil spill, and failure to support climate objectives as set out in the 2015 Paris Agreement.
In this blog, we explain:
- how the NCP complaints (or “specific instance”) process works, including for which entities the Guidelines and NCP complaints will be relevant;
- how the NCP complaints process differs from other claim and complaint avenues available to individuals and organisations seeking to raise environmental issues;
- why multinational enterprises subject to an NCP complaint may choose to engage with the complaint, and how these incentives have evolved in light of the 2023 updates to the Guidelines; and
- how complaints relevant to and/or brought before more than one NCP are typically managed, which can be important in cases of environmental harm involving enterprises and/or operations in multiple jurisdictions.
The Guidelines and NCP specific instance procedure
The Guidelines set out recommendations from the OECD Member countries to multinational enterprises which (according to the Guidelines’ Foreword) aim to enhance business contributions to sustainable development and mitigate businesses’ adverse impacts on people, the planet and society. The Guidelines cover a number of areas, including human rights, bribery and corruption, consumer interest and – the focus of the present post – the environment.
Specifically in relation to the environment, the Guidelines advise that multinational enterprises should have an appropriate environmental management system (including with adequate risk-based due diligence); should engage meaningfully with relevant affected stakeholders; and should not use a lack of scientific certainty as a reason to postpone cost-effective measures to prevent or minimise serious or irreversible damage to the environment.
Neither the Guidelines nor the NCP specific instance procedures are binding on multinational enterprises. NCP specific instance procedures serve as a non-judicial grievance mechanism which “contribute to the resolution of issues that arise relating to the implementation of the Guidelines in specific instances” (Guidelines, p. 59). Each OECD Member country has its own NCP (and is obliged to do so following Decision of the Council OECD/Legal/0307), and each one applies its own procedures when considering specific instances raised under the Guidelines.
There are three stages in a complaint. The UK NCP Specific Instance Procedures are set out here, but the same three stages are typical of other countries’ procedures.
- First, upon receiving a complaint, the UK NCP will issue an Initial Assessment in which it will decide, amongst other things, whether there is enough information to warrant further examination of the issues.
- If the complaint passes that initial ‘sift’, the second stage consists of mediation and (if mediation is refused or, in some cases, fails) fact finding.
- The third stage involves publication of a Final Statement (recent examples are accessible here), which will include “an argued rationale behind each conclusion including a clear statement as to whether or not the company is in breach of the Guidelines” and, where appropriate, specific recommendations to bring the company’s conduct into line with the Guidelines. Where recommendations are made, the UK NCP will also specify a date by which all parties should produce an update on the respondent enterprise’s progress in implementing the NCP’s recommendations. However, following a successful mediation, the final statement may be slightly different. It will focus on describing the issues, the parties’ respective positions, the steps taken by the NCP to assist the parties, and details of when agreement was reached. The statement may also include recommendations on the implementation of the Guidelines, as appropriate. If the parties consent, the NCP can include information about the contents of the parties’ agreement in its Final Statement.
The NCP specific instance procedure as compared to alternative complaints avenues
The NCP specific instance procedure has a number of features which distinguish it from other avenues for complaints (such as litigation or regulator complaints).
- Voluntary nature – multinational enterprises are not obliged to respond to a complaint, to participate in mediation, or to comply with any recommendations made by an NCP.
- Flexibility in outcome – traditional avenues of redress focus on certain well-established forms of relief (such as orders for monetary compensation, declarations that an act or omission was unlawful, or an order requiring a person to do or not to do something). In contrast, there is considerable scope for NCPs to make recommendations which can bring an enterprise into compliance with the Guidelines.
- Room for interpretation – the Guidelines are less prescriptive than national or supranational legislation, and there is therefore more scope for both claimants and respondent enterprises to make arguments about the correct interpretation of the Guidelines and the standard they set for enterprises.
- Strong focus on mediation – the Guidelines encourage open dialogue between complainants and respondent enterprises, and go to significant lengths to facilitate such dialogue.
- Requirement for activities to be commercial in nature – NCPs will only hear complaints in relation to activities of a commercial nature, irrespective of whether the enterprise is wholly private, wholly state-owned, or mixed. For example, in a complaint brought against FIFA over its selection of Qatar as the host state for the 2022 FIFA World Cup in spite of its allegedly poor human rights record, the Swiss NCP (in an Initial Assessment published in 13 October 2015) allowed the complaint to proceed on the basis that it related to activities of “a commercial nature”. In contrast, the Swiss NCP rejected another complaint brought against FIFA (in an Initial Assessment published on 17 August 2016) on the basis that the complaint (about a sheikh being allowed to stand as a candidate in the FIFA presidential election) did not relate to FIFA’s commercial activities. In the environmental sphere, the UK NCP dismissed Global Witness’ climate change-related complaint against UK Export Finance in an Initial Assessment published in September 2020 on the grounds that UK Export Finance does not engage in commercial activities and instead provides financial products which are not available on the private market.
- Co-existence with parallel court proceedings – complaints under the Guidelines can typically proceed alongside court proceedings concerning the same subject matter, despite this being a matter that may prevent pursuit of some other forms of legal proceedings. In guidance published in September 2019, the UK NCP stated that the existence of parallel proceedings will not in itself mean that a NCP investigation and/or determination will be suspended, but that a complaint will be suspended only if the UK NCP is satisfied that the suspension is necessary in order to avoid serious prejudice to a party to parallel proceedings and is appropriate in the circumstances. That said, there is precedent for an NCP rejecting a complaint on arguably similar grounds: a complaint about the activities of Glencore in Chad was rejected to the extent that it related to a 2020 wastewater spill, on the basis that another body was conducting ongoing investigations in relation to the same subject matter. The complaint was therefore premature.
- No strict standing requirements – when making an Initial Assessment, the UK NCP is required to take into account “the identity of the party (complainant) concerned and its interest in the matter” (UK NCP Specific Instance Procedures, para. 3.4.1). In practice, a complainant with some connection to the matter (such as a civil society organisation that campaigns on the issue) is likely to be found to have sufficient interest to pursue a complaint.
Engagement with NCP complaints by respondent enterprises
As the Guidelines are non-binding and voluntary, there is no legal obligation on enterprises to engage with complaints made via NCPs. However, many enterprises choose to engage with NCP complaints made against them out of a desire to:
- protect their reputation (not least because, where mediation does not occur or succeed in resolving the dispute, the NCP has a wide discretion over the recommendations which it may make if it finds that the respondent enterprise has not complied with the Guidelines);
- avert potential future litigation (although resolution of a complaint before an NCP does not formally preclude a claim, at least before English courts, on the same subject matter); and
- understand whether any of their policies or procedures need improving (often complaints are brought against subsidiaries of a parent company so these complaints can shine a light on allegedly inadequate group practices).
In 2023, the OECD published an update to the Guidelines which has further strengthened the incentives for respondent enterprises to engage with complaints made against them to NCPs. The 2023 update heavily emphasises transparency in the complaints process, and in a range of circumstances now obliges NCPs to publish information about the parties’ positions on the issues raised. For example, where no agreement is reached or a party is unwilling to participate in the specific instance process, the NCP’s statement must now include details of the parties’ respective positions and their engagement in the proceedings. Further, the possibility for an NCP, at its own discretion, to include in its Final Statement its views as to whether the enterprise observed the Guidelines was introduced only in the 2023 update. As a result, we anticipate that enterprises will continue to seek to engage carefully with NCPs and the specific instances raised against them in order to avoid adverse publicity consequences and any mischaracterisation of their position.
Management of specific instances involving more than one NCP
Complaints under the Guidelines often involve more than one NCP which can raise additional complexities around co-ordination and management of the specific instance.
The Guidelines are addressed to enterprises operating “in or from” an adhering country. This means that NCPs may receive complaints regarding conduct taking place within their country or alternatively regarding enterprises established in their country (wherever the relevant conduct occurs). Increasingly, specific instances may concern several NCPs, such as:
- where a specific instance concerns the activities of an enterprise headquartered in one adhering country but having impacts in another adhering country, or an enterprise with different headquarters in multiple adhering countries; or
- where the issues raised in a specific instance take place in several adhering countries, or concern several enterprises established in several adhering countries; or
- where the same specific instance or related specific instances (such as specific instances involving different enterprises active on the same project or in the same supply chain) are submitted to several NCPs.
In such situations, the NCPs should consult with a view to agreeing on a lead NCP. Following discussions with the parties, the complaint may be transferred to a different lead NCP from the NCP to which the case was submitted. Generally, issues will be dealt with by the NCP of the country in which the issues have arisen, although the proposed lead NCP may decline to participate in the complaint.
In the absence of close co-ordination, having complaints submitted to multiple NCPs can create the following risks:
- the potential for inconsistent Initial Assessments and Final Statements on the same facts;
- different accepted scopes will make framing the terms of reference for a joint mediation difficult;
- transferring the complaints back to NCPs not involved in the Good Offices (i.e. mediation) stage for the drafting of the final statement or further investigation may create inefficiencies; and
- the potential for forum/NCP-shopping by targeting the NCPs considered as the most likely to accept a case and/or to interpret and apply the Guidelines favourably to the complainant.
To address those risks there is a renewed emphasis in the 2023 edition of the Guidelines on co-operation between NCPs, with it being explicitly stated that the lead NCP “is responsible for all aspects of the specific instance process” (emphasis added). More direct guidance is given to the NCPs that receive the specific instance to “inform and coordinate with all other concerned NCPs at the outset with the goal of designating the lead and supporting NCPs and adopting coordination arrangements”.
Particularly in light of the increased popularity of the OECD NCP complaints route, this clearer guidance will be welcomed by both complainants and respondents who share a common interest in having complaints handled thoroughly, efficiently and fairly.
This note is provided free of charge as a matter of information only. It is not intended to constitute, nor should it be relied upon as constituting, legal advice, and no responsibility is assumed in relation to the accuracy of the contents of the same as regards anyone choosing to rely upon it.