Annual Report on the OECD Guidelines for Multinational Enterprises: 2003 Edition: Enhancing the Role of Business in the Fight Against Corruption

2003 Annual Report on the OECD Guidelines for Multinational Enterprises ENHANCING THE ROLE OF BUSINESS IN THE FIGHT AGA...

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2003

Annual Report on the OECD Guidelines for Multinational Enterprises ENHANCING THE ROLE OF BUSINESS IN THE FIGHT AGAINST CORRUPTION

It also provides an overview of how the business sector’s contribution to the fight against corruption might be enhanced, with a particular focus on governments’ roles in this effort and on how the Guidelines can be used in synergy with other anti-corruption instruments.

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Annual Report on the OECD Guidelines for Multinational Enterprises

The Guidelines are recommendations to multinational enterprises on their conduct in such areas as labour, environment, consumer protection and the fight against corruption. The recommendations are made by the adhering governments and, although they are not binding, governments are committed to promoting their observance. This book provides an account of what the 38 adhering governments have been doing to enhance the contribution of the Guidelines to the improved functioning of the global economy.

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ENHANCING THE ROLE OF BUSINESS IN THE FIGHT AGAINST CORRUPTION

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ISBN 92-64-01912-X 20 2003 05 1 P

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2003

© OECD, 2003. © Software: 1987-1996, Acrobat is a trademark of ADOBE. All rights reserved. OECD grants you the right to use one copy of this Program for your personal use only. Unauthorised reproduction, lending, hiring, transmission or distribution of any data or software is prohibited. You must treat the Program and associated materials and any elements thereof like any other copyrighted material. All requests should be made to: Head of Publications Service, OECD Publications Service, 2, rue André-Pascal, 75775 Paris Cedex 16, France.

Annual Report on the OECD Guidelines for Multinational Enterprises ENHANCING THE ROLE OF BUSINESS IN THE FIGHT AGAINST CORRUPTION

2003

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: – to achieve the highest sustainable economic growth and employment and a rising standard of living in member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; – to contribute to sound economic expansion in member as well as non-member countries in the process of economic development; and – to contribute to the expansion of world trade on a multilateral, nondiscriminatory basis in accordance with international obligations. The original member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became members subsequently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996), Korea (12th December 1996) and the Slovak Republic (14th December 2000). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention).

Publié en français sous le titre : Rapport annuel sur les principes directeurs à l’intention des entreprises multinationales RENFORCER LE RÔLE DES ENTREPRISES DANS LA LUTTE CONTRE LA CORRUPTION 2003

© OECD 2003 Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, tel. (33-1) 44 07 47 70, fax (33-1) 46 34 67 19, for every country except the United States. In the United States permission should be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400, 222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: www.copyright.com. All other applications for permission to reproduce or translate all or part of this book should be made to OECD Publications, 2, rue André-Pascal, 75775 Paris Cedex 16, France.

Foreword To many people, international investment by multinational enterprises is what globalisation is all about. Promoting appropriate business conduct among such companies is a growing challenge since their operations often straddle dozens of countries and hundreds of cultural, legal and regulatory environments. The OECD Guidelines for Multinational Enterprises aim to help businesses, labour unions and NGOs meet this challenge by providing a global framework for responsible business conduct. While observance of the Guidelines is voluntary for businesses, adhering governments are committed to promoting them and to making them influential among companies operating in or from their territories. This Annual Report on the Guidelines, the third in a series, describes what governments have done to live up to this commitment over the period June 2002-June 2003. It also provides an overview of how the business sector’s contribution to the fight against corruption might be enhanced, focusing, in particular, on governments’ roles in this effort and on how the Guidelines can be used in synergy with other anticorruption instruments.

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Note by the Editor The 2003 Annual Report on the OECD Guidelines on Multinational Enterprises was developed and derestricted for publication under the joint responsibility of the National Contact Points (NCPs) and the Committee for International Investment and Multinational Enterprises (CIME). The material for this publication was prepared by Kathryn Gordon, Senior Economist, with the assistance of Ursula Wynhoven, Consultant, and Pamela Duffin, Publications Co-ordinator, in the OECD Capital Movements, International Investment and Services Division of the OECD Secretariat.

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Table of Contents Part I MEETING OF NATIONAL CONTACT POINTS – AN OVERVIEW OF GUIDELINES-RELATED ACTIVITIES Summary Report of the Chair of the Meeting on the Activities of NCPs.......................... I. II. III. IV. V.

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Introduction and Background ............................................................................................ Institutional Arrangements................................................................................................. Information and Promotion ................................................................................................ Implementation in specific instances ............................................................................... The UN Expert Panel Report on the Illegal Exploitation of Natural Resources in the Democratic Republic of Congo ............................................................................... VI. Follow-up on issues raised at the June 2002 Meetings .................................................. VII. Progress to date and considerations for future action....................................................

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Background Paper on the Scope of the Guidelines ............................................................

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Background Paper on NCP Procedures.................................................................................

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Archive of Communications ......................................................................................................

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Background – The Role of the National Contact Points in the Implementation of the OECD Guidelines for Multinational Enterprises .......................................................

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Consultations – Contributions by Business, Trade Unions and Non-governmental Organisations ..............................................................................................................................

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BIAC Statement ..........................................................................................................................

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TUAC Working Paper on the OECD Guidelines for Multinational Enterprises ...............

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OECD Watch Review of National Contact Points..................................................................

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Part II ROUNDTABLE ON CORPORATE RESPONSIBILITY: ENHANCING THE ROLE OF BUSINESS IN THE FIGHT AGAINST CORRUPTION – MAKING THE MOST OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES Acknowledgements.................................................................................................................... 111 Summary of the Roundtable Discussion ................................................................................ 113

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Opening Remarks – Mrs. Berglind Asgeirsdottir, Deputy Secretary-General, OECD....... 125 Business Approaches to Combating Corrupt Practices ...................................................... 127 Anti-Corruption Instruments and the OECD Guidelines for Multinational Enterprises.................................................................................................................................. 153 Appendix I.

Declaration on International Investment and Multinational Enterprises ........................................................................................................... 181

Appendix II.

The OECD Guidelines for Multinational Enterprises: Text and Implementation Procedures ............................................................ 183

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Part I

MEETING OF NATIONAL CONTACT POINTS – AN OVERVIEW OF GUIDELINES-RELATED ACTIVITIES

Summary Report of the Chair of the Meeting on the Activities of NCPs I.

Introduction and Background

The 2003 annual meeting of the National Contact Points (NCPs) of the OECD Guidelines for Multinational Enterprises (“the Guidelines”) provided an opportunity for NCPs to share their experiences during the third year of implementation since the June 2000 Review. This meeting was held on 23-24 June 2003. Consultations with the Business Industry Advisory Committee (BIAC), the Trade Union Advisory Committee (TUAC), and non governmental organisations were also held. A special consultation took place with representatives of the Global Reporting Initiative. The 2003 Roundtable on Corporate Responsibility focused on the role of the Guidelines in enhancing business’ contribution to the fight against corruption. The present report reviews NCPs activities over the June 2002-June 2003 period. It is based on the discussions held during the third annual meeting of the NCPs (June 23-24, 2003), on individual NCP reports and on other information provided during the period. The report is divided into seven sections. These include: institutional arrangements (Section II); information and promotion (Section III); and implementation in specific instances (Section IV). Section V describes steps taken to date to respond to the UN Expert Panel Report on Illegal Exploitation of Natural Resources in the Democratic Republic of Congo. Section VI describes how the Guidelines institutions have followed up on two issues raised at the June 2002 meetings – the scope of the Guidelines; and NCP procedures. Section VII – “Summary and considerations for future action” – provides a broad review of the third year of implementation activity and proposes a few specific issues for consideration by Guidelines institutions. Two main themes emerge from this report. The first is that the third year of Guidelines’ implementation since the 2000 Review has been marked by a clear consolidation of the gains – already noted in last year’s report – in the visibility, stature and “user recognition” of the Guidelines. The Guidelines are now one of the world’s foremost corporate responsibility instruments. They have been cited by heads of state and are the subject of nearly 25 000 web pages (up from under 5 000 last year). This report will show that the implementation procedures are being used to address questions that go to the heart of the current debate on globalisation – for example,

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some 64 specific instances have been raised that deal with such issues as labour standards, environment and the fight against corruption. The second theme relates to the challenge now facing adhering governments and the many other actors in the Guidelines process – NCPs, businesses, trade unions, NGOs, and adhering and nonadhering governments. Although the Guidelines are now relatively well-known, the challenge will be to ensure that the Guidelines realise their full potential as a vital tool for the international business community and for home and host societies. II.

Institutional Arrangements

The NCP reports show that the institutional arrangements for NCPs were largely stable over the June 2002-June 2003 reporting period. A wide range of organisational forms are in evidence (see Annex). These structures are of the following form: • 21 NCPs consisting of a single government department; • 6 NCPs consisting of multiple government departments; • 8 Tripartite NCPs; • 2 Quadripartite NCPs. NCPs noted that they also use other means for organising consultations and expanding the inclusiveness of their activities. For example, a number of countries reported using advisory committees or permanent bodies, whose members include non-government partners. Others stated that they convened regular meetings with business, trade unions and civil society. Still others state that they have had consultations with NGOs or other partners on an informal basis or in reference to specific issues where partners’ specific expertise is required. III. Information and Promotion The June 2000 Decision of the OECD Council calls on NCPs to undertake promotional activities and to handle enquiries. NCPs have continued to be active in this area. Nearly all NCPs reported further development of their websites on the Guidelines and they have continued to develop promotional material such as brochures and users’ guides. They also reported that Guidelines have been translated into at least 23 languages.1 Promotional activities by NCPs NCPs continued to promote the Guidelines and to raise awareness of them among national actors. Promotional activities included: 10

• Outreach to companies and other partners through mailings, distribution of leaflets, organisation of events, etc. (Argentina, Australia, Estonia, France,

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Summary Report of the Chair of the Meeting on the Activities of NCPs

Germany, Japan, Mexico, New Zealand, Turkey, United Kingdom, United States); • Consultations with national partners in the Guidelines process that are not members of the National Contact Point (Argentina, Australia, Austria, Brazil, Canada, Czech Republic Denmark, Finland, 2 Germany, Japan, Hungary, Ireland, Korea, Netherlands, New Zealand, Slovak Republic, Spain, Sweden, Switzerland, United Kingdom, United States); • Articles in or for the national press and newsletters (Czech Republic, Hungary, New Zealand, Slovak Republic); • Participation in conferences organised by non-governmental actors (Argentina, Brazil, France, Germany, Ireland, Japan, Korea, Netherlands, Slovak Republic, Switzerland, United States); • Cooperation with universities, and training or research institutes (Canada, France, Japan, Mexico, Netherlands, Poland, Slovak Republic, Sweden, United States). Some of the promotional efforts described in the NCP reports include: Promotion at the WSSD. During the World Summit on Sustainable Development (WSSD), which met in August/September 2002 in Johannesburg, the German Federal Ministry of Economics and Labour and the Federation of German Industries (BDI) took part in the major WSSD-related exhibition that showcased sustainable development experiences also in the context of the Guidelines. Extractive Industries Transparency Initiative. On June 17, 2003, the Chair of the CIME – who is also the Dutch NCP – presented the OECD Guidelines and other OECD integrity instruments, to a high-level multi-stakeholder conference in support of the Extractive Industries Transparency Initiative (EITI), launched at the World Summit for Sustainable Development by Prime Minister Blair and supported in the June 2003 Evian Summit Declaration. The CIME Chair’s statement (see the Archive of Communications, document 1) highlights the complementarities between follow-up work on the Guidelines and EITI’s efforts to enhance the transparency of extractive industry companies’ payments and revenues to host governments. Direct marketing. The Polish NCP noted that it had modified its promotional practices, moving away from broad events towards a more focused, “direct marketing” approach. For example, an informational lecture on the Guidelines was given at the prestigious Warsaw School of Economics (WSE). WSE students often seek employment with multinational enterprises and therefore constitute a good target group.3 Incorporating the Guidelines into Australian reporting frameworks. The Australian NCP increased it efforts to incorporate the Guidelines into various domestic corporate governance and social responsibility reporting frameworks (e.g. Standards Australia’s Corporate Governance, Corporate Social Responsibility and Bribery

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papers, Australia’s Triple Bottom Line Reporting Guidelines, Australia’s Environmental Reporting Guidelines and the Australian Securities and Investment Commission’s Socially Responsible Investing Disclosure Guidelines). Swedish Partnership for Global Responsibility. The Swedish NCP described ongoing developments in the “Swedish Partnership for Global Responsibility” (SPGR) – based on the Guidelines and the UN Global Compact and launched last year by the Swedish Prime Minister – as follows: The [SPGR] Secretariat carries on intensive information work on e.g. international developments in corporate social responsibility, international systems of rules and conventions and practical experience and research results. The Secretariat is also organising and facilitating a wide range of activities such as counselling, in-house training, network building, seminars and workshops. Thirteen seminars and four workshops have been held since the launch in Mars 2002. The seminars and workshops highlight specific geographical or thematic issues such as Core Labour Standards, Business in Conflict, Reporting on Non Financial Information, Business in China, Corruption and Socially Responsible Investment. The Guidelines are a very effective tool in this context. Companies can join the Swedish Partnership for Global Responsibility by expressing in writing a will to support and strive to fulfil the OECD Guidelines and the nine principles of the Global Compact. Their co-operation is displayed by posting the company’s name and a description of its work on the Government website.4 European Multi-stakeholder Forum. A number of NCPs (Finland, 5 Ireland) reported contributing to CSR events in connection with the CSR European MultiStakeholder Forum. The report by the European Commission described this forum as follows: The Commission has established a European Multi-Stakeholder Forum on CSR and specific thematic roundtables will meet till spring 2004.6 The trade and international dimension of CSR is an important part of the agenda. The first meeting of the Roundtable on development aspects of CSR was held on 17 March 2003. DG Trade will organise the second meeting of this Roundtable on 29-30 September 2003. A third Roundtable will be held in early 2004 on this topic. In parallel, three other Roundtables are meeting to similar timescales: • Improving knowledge about CSR and facilitating the exchange of experience and good practice; • Fostering CSR among small and medium sized enterprises; • Diversity, convergence and transparency of CSR practices and tools.

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The OECD Guidelines for Multinational Enterprises are regularly referred to and discussed in the meetings of the various Roundtables and of the Coordination Committee of the Forum. DG Trade is active in the various formats of this process, and seeks to promote the Guidelines, and raise stakeholder awareness of how the processes of specific instances and National Contact Points function.

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Promotional activities within governments Inter-governmental promotional activities undertaken during the June 20022003 period included: • Contacts with embassies, consulates, economic attachés, etc. (Australia, Canada, Estonia, Sweden, United States); • Presentation of the Guidelines at corporate responsibility events sponsored elsewhere in the government (Australia, Belgium, Canada, Czech Republic, Netherlands, United States); • Communications with Parliament or Congress (Denmark, Germany, Netherlands, Slovenia, United States); • Presentation of the Guidelines to other Ministries (Brazil, Canada, Mexico, New Zealand, Switzerland, Turkey). Reference to the Guidelines by investment promotion, export credit and investment guarantee agencies Adhering governments have continued to explore ways of ensuring that their support for the Guidelines finds expression in other aspects of national policy. Many adhering governments seek to call attention to the Guidelines by referring to them in various ways in the context of export credit or investment promotion/ guarantee programmes. Table 1 summarises the relationships that have been established between the Guidelines and such programmes. Eleven NCPs report that such linkages exist, including the addition of Sweden and Australia (relative the situation described in the 2002 Annual Report). The Spanish report notes that its NCP has provided the relevant agencies with brochures to be used for informing their clients about the Guidelines. OECD Working Party on Export Credits and Credit Guarantees. At its April 2003 meeting, the OECD’s Working Party on Export Credits and Credit Guarantees (ECG) noted that several Members use the Guidelines in export credit and investment guarantee programmes and publicise these on their export credit agencies’ websites. After a discussion of various approaches to the relationship between the Guidelines and such programmes, the ECG Members agreed to promote the Guidelines to their clients by providing information. High level promotion G8 Summit. The June 2003 Summit Declaration, made at the heads of state meeting in Evian, contains the following reference to the Guidelines: We will work with all interested countries on initiatives that support sustainable economic growth, including the creation of an environment in which business can act responsibly. We

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Table 1. Linkages – The OECD Guidelines and Export Credit, Overseas Investment Guarantee and Inward Investment Promotion Programmes Country

Programme

Description of link

Australia

Export credit and investment promotion

Canada

Export Credits

Australia’s Export Finance and Insurance Corporation (EFIC) promotes corporate social responsibility principles on its website, including the OECD Guidelines. The Australian NCP has developed a comprehensive website including access to the Guidelines, related documentation, links to related sites, procedures for lodgement and review of specific instances, a notice-board advertising coming events and a secure site offering its consultation group secure access to official CIME documents. Many Australian government agency web sites provide links to the Australian NCP site. The Export Development Corporation (EDC) promotes corporate responsibility principles and standards, including the recommendations of the Guidelines. EDC has linked its website with that of Canada’s NCP. It also included the Guidelines in its across-Canada tour to promote business ethics. There is a special agency called “Czech Invest” operating in the Czech Republic which provides information on the Czech business environment to foreign investors. It has prepared an information package (which includes the Guidelines) that is passed to all foreign investors considering investing within the territory of the CR. The Czech NCP (at the Ministry of Finance) cooperates closely with Czech Invest. The Estonian Investment Agency has published a description of the Guidelines and added a link to the Estonian NCP website. The Guidelines are available electronically on the site of ELKE, the Greek investment promotion agency.

Czech Republic Investment promotion

Estonia

Investment promotion

Greece

Investment promotion

Finland

Export promotion

France

Export credits and investment guarantees

This programme, adopted in July 2001, introduces “environmental and other principles” for “export credit guarantees”. It calls the “attention of guarantee applicants” to the Guidelines. Companies applying for export credits or for investment guarantees are systematically informed about the Guidelines. This information takes the form of a letter from the organisation in charge of managing such programmes (COFACE) as well as a letter for companies to sign acknowledging that they are aware of the Guidelines (“avoir pris connaissance des Principes directeurs”).

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Table 1. Linkages – The OECD Guidelines and Export Credit, Overseas Investment Guarantee and Inward Investment Promotion Programmes (cont.) Country

Programme

Description of link

Germany

Investment guarantees

Israel

Investment Promotion Centre

Korea

Trade-investment promotion

Netherlands

Export credits and investment guarantees

Slovenia

Investment promotion and Export credits and investment guaranties

Sweden

Export credits

A reference to the Guidelines is included in the application form for investment guarantees by the Federal Government. The reference also provides a link to information of the Guidelines, in particular the Internet address for the German translation of the Guidelines. The site of Israel’s Investment Promotion Centre has a direct connection to the Israeli NCP web site where the OECD Guidelines are available electronically. The KOTRA (Korean Trade Investment Promotion Agency) and the Korean foreign exchange banks provide information on the Guidelines to multinational enterprises with inward and outward investments. Applicants for these programmes or facilities receive the copies of the Guidelines. In order to qualify, companies must state that they are aware of the guidelines and that they will endeavour to comply with the Guidelines to the best of their ability. Both organisations have added links to the NCP web site. Export credits and investment guaranties (SID) call the Guidelines to the attention of outward investors. The Swedish Export Credits Guarantee Board provides all its customers with information on the rules on bribery, the OECD GL for MNE´s and the Swedish Partnership for Global Responsibility Links connect Guidelines website and investment guarantee website. The Export-Import Bank and the Department of Commerce co-operate with the NCP on the provision of information on the Guidelines to applicants for their programmes in support of US business activities abroad.

United Kingdom Investment guarantees United States

Export and import credits and investment guarantees

also welcome voluntary initiatives by companies that promote corporate social and environmental responsibility, such as the OECD Guidelines for Multinational Enterprises and the UN Global Compact principles consistent with their economic interest. We encourage companies to work with other parties to complement and foster the implementation of existing instruments, such as the OECD Guidelines and the ILO 1998 Declarations on Fundamental Principles and Rights at work.

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G8 Finance Ministers. The Declaration of G8 finance ministers, meeting at Deauville in May 2003, states the following: “We also encourage voluntary private sector initiatives that foster and complement such international efforts to promote corporate social and environmental responsibility as the OECD Guidelines for Multinational Enterprises and the UN Global Compact.” OECD Ministerial Meeting. Under the heading “Sharing in the gains – promoting growth and investment in developing countries”, the Chair’s Summary states: “Business must also be partners in the development process. The OECD Guidelines for Multinational Enterprises have encouraged businesses to take into account not only economic and financial factors, but also the developmental, social and environmental implications of their undertakings.” The address of the Belgian Minister of Foreign Affairs’ to the Ministerial Meeting referred to the Guidelines and noted in particular, their potential role in clarifying corporate responsibilities for companies operating in conflict zones, with a particular focus on the Democratic Republic of Congo (see Section IV, under “The UN Expert Panel Report”). Address by the President of Ireland. The President of Ireland and the Tánaiste cited the Guidelines in their addresses to a business-led conference on Corporate Responsibility in Dublin in March 2003. Netherlands. Several ministers in the Netherlands cite the Guidelines in their speeches. Explicit attention was given to the Guidelines by the Minister of Foreign Affairs during a CSR-Europe conference in the Netherlands. European Parliament Resolution. In May 2003, the European Parliament adopted a Resolution 7 that refers to the OECD Guidelines and the International Labour Organisation’s Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy as “the two most authoritative internationally agreed standards for corporate conduct”. The statement also “highlights the importance … of building trust and consensus and support for internationally accepted principles such as the OECD Guidelines for Multinational Enterprises and the Global Reporting Initiative (GRI)…”. Promotional activities by the OECD Secretariat

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On 4 April 2003, Secretary General Donald Johnston held an informal Roundtable on Corporate Responsibility. This event was attended by senior OECD officials and selected practitioners in the corporate responsibility field. Participants discussed general trends in corporate responsibility practices and how the effectiveness of the Guidelines might be enhanced. Some of the themes developed at the Roundtable were: there is evidence of evolution, progress and construction of a common view of appropriate business conduct in some areas; the credibility of many voluntary initiatives remains an open question; many actors still seek a more appropriate allocation of roles between government and business actors;

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and further enhancement of the transparency of the Guidelines process will help to raise public awareness of the instrument. The Roundtable discussions are summarised in the Archive of Communications, document 2. The OECD Secretariat accepted invitations to participate in more than 30 meetings as part of its contribution to the promotion of the Guidelines. These included events organised by business associations and investment managers, think tanks, adhering governments, NGOs and trade unions. In addition, the Guidelines were promoted at the OECD Global Forum on International Investment; the OECD Agricultural Directorate’s conference on “The Changing Dimensions of the Food Economy”; at the International Energy Agency’s conference series on oil development in the Caspian Sea region; and at the OECD Conference on “Maximising the Benefits of Globalisation for Africa” held in Dakar. Guidelines texts were also included in the “Key Information Brochure” for the OECD Ministerial Meeting; and the OECD Policy Brief on the Guidelines was updated. IV. Implementation in specific instances The OECD Council Decision of June 2000 instructs the NCPs to contribute to the resolution of issues that arise relating to implementation of the Guidelines in specific instances. The NCP will offer a forum for discussion and assist the business community, employee organisations and other parties concerned to deal with the issues raised. Thus, the “specific instances” procedure provides a channel for promoting observance of the Guidelines’ recommendations in the context of individual companies’ operations. The NCP annual report for the 2002-2003 period shows that many new specific instances were raised and that several were concluded. Specific instances – nature and outcomes Some 64 “specific instances” of alleged non-observance of the Guidelines by individual companies have been filed with NCPs. Individual NCP reports showed the following number of specific instances since the 2000 Review: Austria (2), Belgium (1), Brazil (1), Canada (4), Chile (1), Czech Republic (2), Denmark (2), Finland (1), France (9), Germany (5), Japan (3), Korea (2), Mexico (1), Netherlands (10), Norway (1), Poland (2), Sweden (2), Switzerland (1), Turkey (1), United Kingdom (2), United States (11). In some cases, these specific instances are being or have been considered by more than one NCP – thus, a given specific instance could be included in the counts of two or more NCPs. According to the information available in individual annual reports, most specific instances concern Chapter IV (Employment and Industrial Relations). However, some deal with such issues as combating corruption, political involvement and environment. About two thirds of the instances involved companies’ opera-

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tions in non-adhering countries. Approximately 10 requests to consider specific instances have not been accepted by NCPs – sometimes because the matter was considered adequately covered by parallel legal proceedings. In 2003, two of the findings have been made public through NCP press releases (see the Archive of Communications, documents 3 and 4). Specific instances described in individual NCP reports In their 2003 reports, some NCPs chose to provide more details and background on the nature and their handling of specific instances. A selection of these detailed descriptions follows: Denmark. The Danish NCP has received two requests to consider specific instances. In February 2002, a trade union federation raised a specific instance relating to the situation of Malaysian workers in a Danish owned enterprise. An appeals case on the same matter is pending in the Malaysian Supreme Court. In April 2003, a workers’ organisation raised another specific instance involving the situation of workers in Danish-owned banana plantations in Ecuador and Belize. The Danish NCP has not concluded its consideration of these specific instances yet. Germany. One specific instance raised with the German NCP concerned business operations in another adhering country and has been referred to the NCP of that country. The German NCP is supporting the other NCP (e.g. by providing assistance with conciliatory talks). With respect to another instance – this one in a nonadhering country – the NCPs initial assessment was that the Guidelines were not directly applicable due to lack of an “investment nexus”. Nevertheless, in view of the specifics of the case, the German NCP has facilitated conciliatory talks. The NCP reports that, so far, these seem to have aided the parties involved to view the matter in a more objective way and to have created an atmosphere that may lead to further cooperation of the parties concerned. The German NCP also refers to a recent specific instance directed at a bank for its financing of a large infrastructure. This project is in a non-adhering country. The instance raises the more general issue of the applicability of the Guidelines to financial service providers (other NCPs also expressed an interest in this issue during the meetings). Korea. The Korean NCP report provided details of a specific instance in Sri Lanka. It concerns a Sri Lanka/Korean joint venture – 50% owned by the Korean company – which fired four workers for their union organisation activities. Although the joint venture contract states that the Sri Lankan partner is in charge of labour-management, the Korean NCP recommended that the Korean company share “the responsibility as co-manager” and that the company “conform to the OECD Guidelines and resolve its labour disputes”. 18

Mexico. The Mexican NCP has been asked to consider a German company’s closing of a production site in the state of Jalisco. Trade unions argue that the clo-

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sure is in breach of Mexican law and is not in conformity with the employment and industrial relations chapter of the Guidelines. They assert that it was carried out without prior notification or consultation with the workers. The company argues that the closure was in conformity with Mexican law. The legality of strike activity related to the closure is currently under consideration in Mexican courts. The NCP has met with representatives from the trade union as well as with representatives from the company in order to hear their points of view. It has also contacted the Ministry of Labour in order to exchange opinions regarding the application of Mexican labour law and the law’s interaction with the Guidelines. The Mexican NCP hopes “these efforts will be useful to clarify the facts surrounding the closure of the plant”. Netherlands. The Netherlands NCP looked into NGO allegations of child labour in a leading sporting goods company’s outsourcing operations in India. The NCP found that, even though the issues brought to its attention probably still exist in the Indian sporting goods industry at large, the company encourages its suppliers to act in a socially responsible manner. The parties to the specific instance agreed to continue the dialogue on monitoring systems for the company’s codes of conduct. See the Archive of Communications, document 3, for the full text of the joint statement by the Dutch NCP, the company and the NGO. Norway. In 2002, a trade union federation raised a specific instance involving a Norwegian maritime insurance company (P&I club) in the Philippines and Indonesia. The federation had received complaints that in personal injury and death cases, the company refused “to pay contractual benefits to Seafarers in the absence of the Seafarer or his family granting a complete and full release, not only for contractual benefits, but for any causes of action at law”. In addition, complaints had been received that the Norwegian company had refused to honour the vessels owner’s obligation to provide basic health care benefits for injured Seafarers. In October 2002, the NCP focused on making an initial assessment of whether the issues raised by the federation merited further examination. The NCP concluded that the Norwegian company had not been in contradiction with the Guidelines and that the issue did not merit further examination. Poland. The Polish NCP report notes two specific instances, both involving the “Employment and Industrial Relations” Chapter. In the first, the NCP started mediation through correspondence, but this turned out not to be sufficient. The NCP is in constant contact with both sides and has also contacted the German NCP with request for help in contacting the German owner of the Polish company, (hoping that its influence on the Polish Board of Directors could convince both sides to co-operate). In the letter from the German owner, it was claimed that there is no conflict in the company. Another issue – this time in relation to observance of Chapter IV by a construction company – was raised by a trade union from the construction sector. Correspondence has been started and the board was informed

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about the Guidelines. Since the NCP has not received more specific information on the complaint, no further steps have been taken. Sweden. In February, 2003, the Swedish NCP was asked by two NGOs to consider the operations of two Swedish companies in Ghana in relation to the human rights and environmental provisions of the Guidelines. Since the material submitted by the NGOs was incomplete, the NCP collected information from the companies concerned, from the Swedish Metalworkers Union, from the Embassy of Sweden in Nigeria and from a Ghanaian NGO. The NCP held a number of meetings, including separate meetings with the NGOs and the enterprises concerned, as well as a joint information meeting with all parties. The two enterprises and the Swedish Metalworkers Union travelled to the area to investigate. The Swedish NCP concludes that, although environmental and social problems exist in connection with mining in Ghana, the roles played by the two companies in these problems is limited. The NCP finds that the companies “have not failed to comply with the OECD Guidelines in respect of human rights and environmental considerations”. At the same time, the NCP found that the companies’ on-site personnel did not have adequate knowledge of their responsibilities under the Guidelines and encouraged the companies “to enhance knowledge of the Guidelines, both internally and externally”. The full text of the Swedish NCP statement is available in the Archive of Communications, document 4. V.

The UN Expert Panel Report on the Illegal Exploitation of Natural Resources in the Democratic Republic of Congo

In October 2002, a report of the Expert Panel was presented to the United Nations Security Council, which included a discussion of the role of enterprises operating in the Democratic Republic of Congo (DRC). This report referred prominently to the Guidelines. In particular, the report alleges that 85 companies – including 57 companies based in 10 adhering countries – have not observed the Guidelines. At its December 2002 session, the CIME considered the Expert Panel’s report. Upon a mandate of the Committee, the Chair wrote a letter to the attention of the Security Council, expressing the wish of adhering governments to co-operate with the United Nations on the Guidelines issues raised by the Panel report and asking for access to the information on which the Panel’s conclusions on OECD-based enterprises’ roles in DRC were based in order to enable the CIME and NCPs to meet their responsibilities. Clarification of the nature and procedures of the Guidelines was also provided.

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In April 2003, Representatives of countries adhering to the Guidelines met in Paris with members of the Expert Panel to consider possible co-operation. The meeting followed adoption by the United Nations Security Council in January 2003

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of Resolution 1457, which requested the Panel to provide information to the OECD Committee on International Investment and Multinational Enterprises (CIME) and to the NCPs of the countries in which the companies listed in the report are based. The meeting was reported to have contributed to mutual understanding of respective work and procedures and led to agreement to take steps to pursue effective co-operation.8 During the June meeting, NCPs discussed the way the co-operation between the Panel, CIME and the NCPs has developed. Although there was general satisfaction that relations were established and that they had an opportunity to meet members of the Panel in April, there was concern that thus far no exchange of information has taken place. Some NCPs reported that they had been in contact with enterprises named in Annex III of the October 2002 report. Others mentioned that they had approached the Panel by various means, asking for information. The good offices of the CIME Chair have also been used for this purpose. However, since no additional information had been received at the time of the meeting, the NCPs felt that they were not in a position to address the question how the OECD Guidelines should be implemented by individual enterprises in the specific circumstances of the DRC. The NCPs asked the CIME Chair to write a follow-up letter to the Chair of the Panel, Ambassador Kassem. VI. Follow-up on issues raised at the June 2002 Meetings The Chair’s summary from the 2002 Annual Report highlights two issues raised by BIAC, TUAC, or NGOs during last years meetings: 1) the scope of the Guidelines; and 2) NCP procedures. Scope of the Guidelines The question of the scope of the Guidelines – the definition of the activities to which the Guidelines are thought to apply – was raised during the NCP meetings, the consultations and the 2002 Roundtable. The issue was also raised and discussed in all subsequent consultations held during the reporting period. The CIME and its Working Party held several exchanges of views and surveyed delegates’ positions on this issue. The principal themes that emerged from these extensive discussions, exchanges of views and surveys are summarised in the attached Background Paper on the Scope of the Guidelines. Following its April 2003 meeting, the CIME issued a statement on this issue: In considering this issue, the CIME has sought to protect and enhance the credibility and effectiveness of the Guidelines and to remain true to the agreement reached among adhering governments at the 2000 Review after extensive consultations with the business, trade union and NGO communities.

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The Guidelines are a multifaceted instrument and the Committee found it useful to consider this issue with reference to the following, which does not aim to change the balance reached during the 2000 Review: • First, the Guidelines are an Annex of the OECD Declaration on International Investment and Multinational Enterprises. The fact that they are part of the Declaration and that oversight responsibility for them has been assigned by the Council to the CIME – the body charged with responsibility for the Organisation’s work on investment and multinational enterprises – indicates the investment intent of the drafters of the instrument. • Second, the Guidelines are a major corporate responsibility instrument that draws on and reinforces an established body of principles dealing with responsible business conduct. These principles reflect common values that underlie a variety of international declarations and conventions as well as the laws and regulations of governments adhering to the Guidelines. As such, these values are relevant to the activities of multinational enterprises. Thus, as it has already done in a number of areas, the international community may continue to draw on the values underlying the Guidelines in other contexts. • Third, the Guidelines have been developed in the specific context of international investment by multinational enterprises and their application rests on the presence of an investment nexus. When considering the application of the Guidelines, flexibility is required. This is reflected in Recommendation II.10 and its commentary that deal with relations among suppliers and other business partners. These texts link the issue of scope to the practical ability of enterprises to influence the conduct of their business partners with whom they have an investment like relationship. In considering Recommendation II.10, a caseby-case approach is warranted that takes account of all factors relevant to the nature of the relationship and the degree of influence. The fact that the OECD Declaration does not provide precise definitions of international investment and multinational enterprises allows for flexibility of interpretation and adaptation to particular circumstances. NCP Procedures The question of National Contact Point (NCP) procedures arose on several occasions during the June 2002 NCP meeting, consultations and Roundtable. The Procedural Guidance provides that “NCPs will operate in accordance with core criteria of visibility, accessibility, transparency and accountability to further the objective of functional equivalence”. The Report of the Chair of the 2002 NCP meeting states the following:

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Some NCPs are developing procedures for their activities and a few have published such procedures. The NCP discussions suggest that there are differences in how NCPs approach their responsibilities. For example, NCPs differ in how they handle confidentiality and transparency in relation to specific instances. Practices differ in relation to disclosure of information while the instance is being considered and after it has been concluded. There appears to be a need for exchange of information on NCP practices and procedures.

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Over the June 2002-June 2003 reporting period, the CIME and the Working Party on the Declaration undertook to consider this issue. At its September 2002 meeting, the CIME decided to gather information about NCP procedures through the use of a questionnaire; to use the results to facilitate a discussion of NCP procedures at the next annual NCP meeting; and to refer the matter to its Working Party for action. The Working Party developed a questionnaire on NCP procedures and decided that focusing on procedures for specific instances would be useful (but that this would not preclude subsequent consideration of other procedural matters at a later date). The questionnaire was then distributed to NCPs and posted on the NCPs’ Electronic Discussion Group. At its April 2003 meeting, the WPD held a preliminary exchange of views on NCP procedures and took note of the replies to the questionnaire that had been received thus far. The Working Party asked the Secretariat to prepare a synthesis paper of the issues identified in the responses to the questionnaire and the debate in the Working Party meeting. This synthesis is reproduced in the attached Background Paper on NCP Procedures. The responses show broad agreement in principle on procedural questions and confidence in the soundness of the Procedural Guidance set forth in the Council Decision and related Commentary. Practices in a number of areas vary from one NCP to another. Selected findings are summarised below: • Measures to promote timeliness and efficiency. NCPs agree that timeliness in handling a specific instance is important. At the same time, some NCPs observed that the issue of timeliness needs to be considered with respect to the specifics of the specific instance under consideration. For example, how much information on the instance is readily available? How divergent or entrenched are the positions of the various parties to the instance? Timeliness might also depend on the actions of others (e.g. the parties themselves or other government offices). NCPs also noted that the proper handling of specific instances is often time consuming and that insistence on rapid treatment of instances could lower the quality of their outcomes. Some NCPs have imposed deadlines on themselves and some ask parties and others to respond within certain timeframes. In contrast, other suggested that the voluntary nature of the Guidelines meant that timeframes could not be insisted on and that NCPs had to resort to “asking nicely”. In some cases, the responses note that the workability of such deadlines remains untested. Some NCPs have observed that the procedures they had developed have proved impracticable and needed revision. Finally, NCPs agreed that timeliness would be less of an issue if parties were kept informed about progress on the handling of specific instances. Indeed, one NGO at the consultations said that it had published statements about an ongoing specific instance – a fact that could raise difficult issues in connec-

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tion with the confidentiality rules for specific instances – because it had not received news of the instance for more than a year and wanted to ensure that the matter was still on the NCP’s agenda. • Measures promoting communication and transparency. All responding NCPs recognise the importance of transparency. Despite this agreement in principle, the questionnaire responses suggest that NCPs’ practical approaches to transparency vary widely in such areas as: informing parties of the progress in handling specific instances, provision of information to non parties, publication of the fact that a specific instance has been raised, making statements while the specific instance is being considered, publication of the reasons for not agreeing to consider a specific instance, and the naming of parties to a specific instance. At the NCP meeting, there was considerable agreement that the balance between confidentiality and transparency shifts in the course of the consideration of a specific instance – whereas confidentiality is a high priority in the early phases, there should be a presumption in favour of transparency in the concluding phase. Finally, some NCPs expressed an interest in developing a “register” or “database” of specific instances designed to help NCPs share information on the status of specific instances. The Chair proposed that this issue be taken up by the CIME. • Responsibility for information provision and challenges in gathering information. Most NCPs agree that the primary responsibility for information provision rests with the individual or organisation raising the specific instance and with the company concerned. Seven of the 12 experienced NCPs (that is, NCPs that have dealt with at least one specific instance) that responded to the questionnaire have dealt with specific instances involving business operations in non-adhering countries. Two of these observed that information gathering had been a problem in such specific instances. Such problems included language and technical communication difficulties, as well as obtaining information about a trial ongoing in one of the non-adhering countries concerned. At the meeting, one NCP noted that it was considering whether or not to take up a specific instance concerning a broad range of issues about which the party raising the specific instance had no first hand information.

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• The role of national legal, regulatory or administrative procedures. Ten of the 12 experienced NCPs noted that at least one of their specific instances involved business conduct that was covered by host country laws, regulations or administrative procedures. NCPs differed in their views on whether the fact that a specific instance concerned business conduct covered by host country procedures would influence their decision to agree to consider a specific instance. Nine NCPs state that it would – or already has – influenced decisions. One NCP has refused a specific instance on the grounds that it concerned business conduct that was also the subject of a legal pro-

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cedure. Another accepted a specific instance being dealt with under parallel home country procedures, but had to modify its own procedures as a result. One NCP responded that it “encourages complainants to address their complaints/issues with the MNE directly and with the appropriate regulatory/legal authorities… prior to lodging a complaint with the NCP”, and that it would take such proceedings into account – without necessarily being bound by them – when determining its approach to specific instances. During the meeting, one NCP stated that making acceptance of a specific instance conditional on first exhausting legal remedies was not, in its view, consistent with its understanding of the role of the Guidelines. Despite the considerable investment made in consideration of this issue during the June 2002-June 2003 period, the discussions at the June meetings suggested that many questions remain. The consultations showed that the business, trade union and NGO communities and the NCPs agreed that the ultimate objective is that “functional equivalence” – the objective set forth in the Procedural Guidance – is a meaningful one. With this objective in mind, they also agreed (though for different reasons) that NCP procedures would benefit from continued improvement and refinement. TUAC and NGOs concerns focused on the slowness of responses and lack of transparency of many NCPs. BIAC stressed the need to respect the procedural Guidance (and expressed concern, in particular, about what it saw as a tendency to publicise “instances” that have not yet been concluded). Cooperation among NCPs – with many of the specific instances being raised with more than one NCP – was also raised as a procedural issue by several NCPs. One of the conclusions of the meeting was that it might be useful for NCPs to continue to learn from each other’s experiences with a view to improving their procedures and making progress on realising the goal of “functional equivalence” among NCPs. VII. Progress to date and considerations for future action This draft report suggests that the Guidelines now rank among the world’s foremost corporate responsibility instruments. The third year of Guidelines implementation since the 2000 Review has been marked by consolidation of the gains in the visibility, stature and “user recognition” of the Guidelines. The Guidelines have been cited by heads of state and in the world business press. Their implementation procedures are being used to address questions that go to the heart of the current debate on globalisation – human rights, labour standards and business operations in conflict zones such as the DRC. The number of web pages referring to the Guidelines – currently 25 000 – has increased by 400 per cent since last year’s report. 25

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But the adhering governments and their partners in the Guidelines process face ongoing challenges when trying to ensure that the Guidelines live up to their potential as a vital instrument for the international business community and for home and host societies. Besides more effective co-operation with other global instruments for corporate responsibility (such as the UN Global Compact and the Global Reporting Initiative), the following issues were identified as areas for possible future work: Deepening understanding of NCP procedures. Over the past year, the CIME and its Working Party have invested heavily in their consideration of NCP procedures. This discussion has shown that NCPs feel comfortable with the framework provided in the Council Decision and its Procedural Guidance. However, despite this broad agreement on the general framework, there appear to be some significant differences in practice, the reasons for which have not been fully clarified by the survey-based discussions held so far. A case-based approach – whereby an NCP would volunteer to share and discuss experiences with a specific instance that he/ she has dealt with – might provide valuable inputs to ongoing consideration of this issue. Relationship between Guidelines implementation and national legal, regulatory or administrative procedures. Information provided by NCPs suggests that it is quite common to use the specific instances procedure in parallel with legal, regulatory or administrative procedures. The Japanese delegation to the CIME has circulated a room document requesting that consideration be given to this issue in the context of legal and other procedures in host countries. An added complexity is that, in some cases and for a variety of reasons, these procedures might not be working well. This has already emerged as a challenge for some of the specific instances in non-adhering countries. For example, the Swedish NCP’s statement concerning two Swedish companies’ operations in Ghana (see the Archive of Communications, document 4) notes that the “regulatory framework and judicial institutions” in place in Ghana had “insufficient resources and capacity” to deal with the “environmental and social problems” encountered in that country’s mining sector. During the NCP meetings, the Dutch NCP noted that, even when used in conjunction with effective legal and regulatory institutions, the Guidelines could, in some cases, offer “value-added”. A consideration of the relationship between the Guidelines institutions and legal and regulatory processes might assist NCPs in shaping their approach to this issue.

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The Guidelines and Non-adhering Countries. The relationship between the Guidelines and non-adhering countries was discussed in several contexts during the NCP meetings. First, it was mentioned as a challenge for promotion – which groups in non-member host societies should be the target audiences for such promotion? what messages are likely to attract these groups’ interest and cooperation? Second, several specific instances concerning business operations in non-

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adhering countries have posed challenges in terms of access to information (Korea and Sweden mention the use of their embassy networks in this connection). Third, the issue of the interaction of the specific instance procedure with non-adhering host country legal and regulatory processes was also raised by several NCPs. More generally, NCPs might want to reflect on how relations with various actors in nonadhering countries might be structured so as to promote progress on the ultimate goal of the Guidelines – to ensure that enterprises’ operations “are in harmony with government policies, to strengthen the basis of mutual confidence between enterprises and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development made by multinational enterprises”. Organising effective two-way co-operation with the UN Expert Panel on the Democratic Republic of Congo. The severity of the crisis in the DRC and the high profile accorded to the Guidelines in the Expert Panel’s report have focused attention on the Guidelines. The challenge for the Guidelines institutions in the coming year will be to be seen as dealing fairly with companies and other actors and, in the process and to the extent possible, making a constructive contribution to broader efforts to improve the situation in the DRC. Business activity in conflict zones raises difficult ethical and economic questions. In addition, procedural difficulties – including access to information – have been encountered in dealing with the Panel’s allegations.

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Notes 1. Czech, Danish, Dutch, English, Estonian, Finnish, French, German, Greek, Hungarian, Norwegian, Japanese, Korean, Lithuanian, Polish, Portuguese, Slovak, Slovene, Spanish, Swedish, Turkish and the official languages of Belgium and Switzerland. 2. In October 2002, the Finnish NCP co-organised (with other Ministries) a conference that was part of the Business Marathon Campaign – sponsored by CSR Europe, the Copenhagen Centre and the International Business Leaders Forum – which was launched by business leaders after the appeal to business by the European Heads of State at the European Summit in 2000. 3. The Polish NCP’s annual report states the following: “Promotional and informational lectures on the Guidelines have been held at the Warsaw School of Economics (WSE), the most prestigious economics university in Poland. The audience were [law] students in their last year of studies… WSE students tend to seek employment with companies with foreign capital and therefore constitute the right target group to be informed on the Guidelines. Presentation was held in January 2003 and concerned general information about the Guidelines and more detailed information on the IV chapter – Employment and Industrial Relations, which constitutes the most popular topic of claims raised at the Polish NCP. The audience has shown much interest in the lecture and the NCP answered numerous questions about the Guidelines afterwards.” 4. www.ud.se/ga. 5. The Finnish NCP report notes that, in April 2003, it organised a special seminar on EU-wide strategy for corporate social responsibility and the public role in the promotion of CSR. The seminar brought out views of the European Commission, UK government, Finnish public administration, business and labour organisations and other non-governmental organisations on the challenges of the public authorities in the promotion of CSR. Furthermore, the aim of the seminar was to promote the Guidelines and to offer a discussion forum for the different parties and to give feedback to the Finish NCP for preparing a special governmental CSR programme. 6. See reports and all information available on the Forum at following addresses: forum.europa.eu.int/irc/empl/csr_eu_multi_stakeholder_forum/info/data/en/csr%20ems%20forum.htm europa.eu.int/comm/enterprise/csr/roundtables.htm 7. P5_TA-PROV(2003)0200. 8. See OECD news release dated 11 April 2003 [www.oecd.org/daf/investment/guidelines].

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Annex Structure of the National Contact Points1 Governmental location of the NCP

Other ministries and/ or agencies involved2

Argentina

Single department

Ministry of Foreign Affairs, International Trade and Worship

Australia

Single department

Foreign Investment Policy Division of the Ministry of Treasury

Austria

Single department

Export and Investment – Other division of the Federal Ministry of Economic Affairs and Policy Division, Federal Labour Ministry of Economic – The Federal Chancellery and other Affairs and Labour Federal Ministries concerned

– Foreign Investment Review Board

Comments and notes

The Australian NCP liaises with other government departments as necessary and holds bi-annual interdepartmental meetings chaired by the Australian NCP to discuss Guidelines issues. The NCP holds bi-annual community consultations with business, trade unions and other NGO representatives. In the assessment of specific instances, the NCP may establish a special advisory consultation group of interested parties, including government, members from the business community, labour federations and other NGOs and experts. An Advisory Committee composed of representatives from other Federal government departments, social partners and interested NGOs supports the NCP. The Committee has its own rules of procedure, met three times over the review period and discussed all Guidelines-related business.

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Composition of the NCP


Belgium

Brazil

Governmental location of the NCP


Federal Public Service of – Tripartite with Economy, PMEs, Middle representatives of Classes and Energy – business and labour – organisations as well as with representatives of – the federal government – and regional – governments. – – Single department Ministry of Finance – – – – – – –

Canada

Interdepartmental Committee

– – – – – – – –

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Chile

Quadripartite

– Ministry of Foreign – Affairs, Directorate of International Economic – Relations

Federal Public Service of Environment Federal Public Service of Labour Federal Public Service of Foreign Affairs Federal Public Service of Finance Federal Public Service of Justice Region of Brussels Flemish Region Walloon Region Ministry of Foreign Relations Ministry of Planning, Budget and Management Ministry of Labour and Employment Ministry of Justice Ministry of Environment Ministry of Science and Technology Ministry of Development,, Industry and Trade Brazilian Central Bank Department of Foreign Affairs and International Trade Industry Canada Human Resources Development Canada Environment Canada Natural Resources Canada Department of Finance Canadian International Development Agency Ministry of Economics Ministry of Labour General Secretariat of the Presidency

Comments and notes

Representatives from other government Offices can be asked to participate as well as Trade Unions, like CUT and “Força Sindical”; NGOs that deal with Ethics, like ETHOS; Industry and Trade Confederations; and other institutions like SOBEET (Brazilian Society For Trans- national Enterprises and Globalisation Studies).


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Structure of the National Contact Points1 (cont.)

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Structure of the National Contact Points1 (cont.) Composition of the NCP


Czech Republic Single Department

Ministry of Finance

– – – – – – – –

Denmark

Tripartite with several ministries

Ministry of Employment – Danish Agency for Trade and Industry – Environmental Protection Agency – Ministry of Economic and Business Affairs – Ministry of Foreign Affairs

Estonia


Ministry of Economic Affairs

Comments and notes

Ministry of Labour and Social Affairs The NCP works in co-operation with the social partners. Ministry of Industry and Trade Ministry of Interior Ministry of Justice Ministry of Foreign Affairs Ministry of the Environment Czech National Bank Office for the Protection of Economic Competition – Czech Statistical Office – Securities Commission – CzechInvest

– – – – –

Ministry of Social Affairs Ministry of Environment Estonian Investment Agency Estonian Export Agency Ministry of Foreign Affairs

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Finland



Quadri-partite with Advisory Committee on – several ministries and International Investment – – civil society partners and Multinational Enterprises (MONIKA), – – Ministry of Trade and – Industry –

Ministry of Trade and Industry Ministry of Foreign Affairs Ministry of Justice Ministry of Finance Ministry of Social Affairs and Health Ministry of Labour Ministry of Environment

Comments and notes

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The Advisory Committee on International Investment and Multinational Enterprises of Finland (MONIKA), which operates under the auspices of the Ministry of Trade and Industry as a wide-scoped forum of public and private representatives for issues related to investments, acts as the Finnish NCP. The MONIKA Committee, which has been established by the Government Decree 335/2001, takes care of the promotion of the Guidelines as important principles of Corporate Social Responsibility and serves as an advisory forum in other issues related to the CIME. The Ministry of Trade and Industry is responsible for the handling of inquiries and the implementation in Specific Instances. The members of the committee come from various ministries, The Bank of Finland, business and labour organisations and NGOs Social partners are represented in the NCP by TT – The Confederation of Finnish Industry and Employers, The Finnish Section of the International Chamber of Commerce (ICC) and the Central Organization of Finnish Trade Unions SAK. The NGOs are represented by the Service Centre for Development Cooperation KEPA. The committee has met several times over the review period.


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Structure of the National Contact Points1 (cont.) Governmental location of the NCP


France


Germany

Single Department

Treasury Department, – Ministry of Economy and – Finance – Federal Ministry of – Economics and Labour – – – –

Greece

Single Department

Hungary

Interdepartmental Office

Iceland Ireland

Interdepartmental Office Single Department

Israel

Single department

Ministry of Labour Ministry of Environment Ministry of Foreign Affairs Ministry of Foreign Affairs Ministry of Justice Ministry of Finance Ministry of Economic Co-operation Ministry of Environment

Comments and notes

The NCP works in close co-operation with the social partners. A ’Working Party on the OECD Guidelines’ composed of representatives from those Federal ministries mentioned in the previous column, business organisations, employee organisations and selected NGOs meets regularly to discuss all Guidelines-related issues.

Directorate for International Organisations and Policies, Ministry of Economy Ministry of Economy and – Ministry of Economy and Transport In 2002 after the election Ministry of Transport – Ministry of Finance Economic Affairs and the Ministry of – Ministry of Foreign Affairs Transport and Water Management were merged. The legal successor is the Ministry of Economy and Transport which was restructured and which kept the task of the Secretariat of HNCP. Ministries of Industry and Commerce Enterprise Policy Unit, Department of Enterprise, Trade and Employment Ministry of Trade, – Ministry of Foreign Affairs An Advisory Committee will be Industry and Labour composed of representatives from other Federal government departments

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Italy

Japan

Korea

Lithuania



Direction Générale, Ministry of Production Activities Interministerial body Ministry of Foreign composed of three Affairs ministries. Ministry of Health, Labour and Welfare Ministry of Economy, Trade and Industry Executive Committee on – Ministry of Foreign Affairs Interdepartmental Foreign Direct – Ministry of Finance and Economy Office, with regional Investment – Korean Trade-Investment governments and Promotion Agency several ministries Ministry of Economics – Confederation of Trade Unions Tripartite with – Labour Federation representatives of – Confederation of Business business and labour Employers organisations as well as – Confederation of Industry with representatives of government

Comments and notes

Single Department

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Luxembourg

Tripartite

Ministry of Economics

Mexico

Single Department

Ministry of Economy

– – – – – – – –

Ministry of Economics General Inspector of Finances STATEC Ministry of Finance Employment Administration Ministry of Labour and Employment 3 Employers’ federations 2 Trade union federations

The Japanese NCP wasreorganised in 2002 as an inter-ministerial body composed of three ministries.

The Lithuanian NCP has recently been reorganised to insure effective collaboration with trade unions and business community. The NCP works in close co-operation with the Tripartite Council – a national body, including representatives of government agencies as well as employee and business organisations.


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Structure of the National Contact Points1 (cont.) Composition of the NCP



Netherlands

Interdepartmental Office

Ministry of Economic Affairs

– – – –

New Zealand

Single Department

Ministry of Economic Development

– All departments, particularly the Ministry of Foreign Affairs and Trade, Department of Labour, Ministry for the Environment and Treasury

Norway

Tripartite, with several Department for Trade – Ministry of Foreign Affairs ministries Policy, Environment and – Ministry of Industry and Trade Resources, Ministry of Foreign Affairs

Poland

Single Department

Polish Agency for Foreign Investment

Portugal

Single Department

ICEP Portugal (the Portuguese Promotion Agency)

Slovak Republic

Single Department

Ministry of Economics

The NCP belongs as a single department to the Slovak Agency for the Development of Investment and Trade (established as a contributory organisation of the Ministry of Economy).

Slovenia

Single Department

Foreign Economic – Other ministries and other parts of Relations Division, the Ministry of the Economy Ministry of the Economy – Slovenia Trade and Investment Promotion Agency – Slovenia Export Credit Agency

The Advisory Committee has considered if a Single department structure is the best solution. No decision has been made, yet.

All departments, especially: Ministry of Social Affairs Ministry of Environment Ministry of Foreign Affairs

Comments and notes

Regular consultations with all stakeholders.

A Liaison Group comprising representatives of other government departments, social partners and NGOs, supports the NCP. The NCP also liaises with other government departments and agencies as necessary. Summary Report of the Chair of the Meeting on the Activities of NCPs

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Spain

Single Department

General Secretary for International Trade, Ministry of Economy

The NCP liaises with representatives of – Ministry of Environment social partners and NGOs. – Ministry of Justice – Ministry of Health and Consommation – Ministry of Science and Technology – Ministry of Labour and Social Affairs

Sweden

– Ministry of Industry, Employment Tripartite, with several Department for and Communications ministries International Trade and – Ministry of Environment Policy, Ministry for – Ministry of Justice Foreign Affairs – National Board of Trade

The Ministry for Foreign Affairs, Department for International Trade Policy, chairs the NCP and has the ultimate responsibility for its work and its decisions.

Switzerland

Single Department

International Investment and Multinational Enterprises Unit, State Secretariat for Economic Affairs

Co-operation with other government agencies, business, trade unions and NGOs is institutionalised through a liaison group that meets regularly.

Turkey

Single Department

General Directorate of Foreign Investment, Undersecretariat of Treasury

United Kingdom

Single Department

International Investment – Foreign and Commonwealth Office and Competition Policy – Department for International development Unit, Department of Trade and Industry

Comments and notes

The NCP liaises with other government departments as necessary and has regular informal contacts with business, trade union and NGO representatives.


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United States



Single Department

Office of Investment Affairs of the Department of State


Comments and notes

The US NCP queries other agencies as needed and, when necessary, an interagency committee chaired by the Office of Investment Affairs meets to discuss Guidelines issues. Business, labour and civil society organisations are consulted regulatory via the Advisory Council on International Economic Policy or individually on an ad hoc basis.

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1. This table is based on information provided by the National Contact Points in their 2001, 2002 and 2003 annual reports. 2. The information provided here is based on the ministries and/or government agencies explicitly mentioned in the NCP reports. Source: OECD.

Background Paper on the Scope of the Guidelines Background At its December 2002 meeting, the Working Party on the Declaration (WPD) held a preliminary exchange of views on the scope of the Guidelines and took note of the replies to a questionnaire circulated prior to the meeting. The Working Party asked the Secretariat to prepare a short summary of the issues identified on the basis of the 22 responses to the questionnaire, on other submissions received and on the debate in the Working Party meeting. This paper responds to that request. This report is organised around four themes that emerge from the questionnaire responses. The themes involve different aspects of the Guidelines as a corporate responsibility instrument; that is, they are: • An element of the OECD Declaration. • Values and principles having broad scope of application. • Recommendations covering areas such as supply chain. • Entrusted to international investment officials for implementation. I.1. An element of the OECD Declaration The Guidelines are part of the OECD Declaration on International Investment and Multinational Enterprises, the other elements of which relate to national treatment, conflicting requirements on enterprises and international investment incentives and disincentives. According to a questionnaire response, “the fact that [the Guidelines] are part of the Declaration … suggests strongly that [they] target the investment as opposed to trade, activities of MNEs”. The importance of this facet of the Guidelines was highlighted by several member governments and by BIAC during the negotiations leading up to the 2000 Review. BIAC has mentioned it in many of its public statements about the Guidelines. For example, at the June 2001 consultations it stated that “[the Guidelines] are “intended to provide a framework for good business conduct and, as part of the wider OECD Declaration… to encourage a balance of responsibility between international business and governments. The

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official and clear aim of the Guidelines is to improve the climate for foreign direct investment and to promote the positive contribution that multinational enterprises can bring”. I.2. Values and principles having broad scope of application As pointed out at the 2001 Roundtable, the Guidelines’ recommendations draw on and reinforce values, principles and concepts of corporate responsibility that have developed over a period of several decades.1 As such, the Guidelines are part of an evolving framework –expressed in international declarations, codes, conventions or guidelines – providing guidance for companies and other actors about appropriate conduct. The Guidelines Preface and Commentaries cite several of these outside sources explicitly (e.g. Universal Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, Agenda 21 and the Copenhagen Declaration for Social Development). They also refer to a number of OECD instruments (e.g. the OECD Bribery Convention, the OECD Principles of Corporate Governance, the OECD Guidelines on Transfer Pricing for Multinational Enterprises and Tax Administrations and the OECD Guidelines for Consumer Protection in the Context of Electronic Commerce). The CIME commentary on the Guidelines chapters also refers to a number of external sources and OECD instruments. Finally, the recommendations refer to principles and concepts that other actors – individual businesses, business associations, trade unions and NGOs, individual governments and intergovernmental organisations – also use and promote. Often these actors do not refer to the distinction between investment and other activities when discussing the applicability of their principles and concepts. For example, the International Chamber of Commerce’s (ICCs) rules of conduct and corporate practices manual on fighting bribery contain recommendations that are relevant to both trade and investment (e.g. private-to-private bribery, use of agents, political contributions) and that are also dealt with in a similar way by Guidelines recommendations. The “Introduction” to the ICCs Rules of Conduct embodies a broad view of the “business transactions” to which the rules apply.

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The Guidelines are part of an evolving framework of values, principles and concepts relevant to the conduct of international business. They support, reinforce and promote this framework inasmuch as they are a tangible expression of the importance that the 37 adhering governments attach to them. The fact that they do this within the context of an international investment agreement, in no way detracts from the broader validity and applicability of the values and principles they express. Conversely, the fact that these values may be applicable to a

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broad range of business activities does not necessarily imply that the Guidelines themselves must be deemed applicable to this same broad range of activities. I.3. Recommendations covering areas such as supply chain Paragraph II.10 of the Guidelines asks enterprises to: “encourage, where practicable, business partners, including suppliers and subcontractors, to apply principles of corporate conduct compatible with the Guidelines.” Paragraph 10 of the commentary – which provides the CIME perspective on this recommendation – states: “It is recognised that there are practical limitations to the ability of enterprises to influence the conduct of their business partners. The extent of these limitations depends on sectoral, enterprise and product characteristics such as the number of suppliers or other business partners, the structure and complexity of the supply chain and the market position of the enterprise vis-à-vis its suppliers or other business partners… Established or direct business relationships are the main object of this recommendation rather than all individual or ad hoc contracts or transactions that are based solely on open market operations or client relationships. In cases where direct influence of business partners is not possible, the objective could be met by means of dissemination of general policy statements of the enterprise or membership in business federations that encourage business partners to apply principles of corporate conduct compatible with the Guidelines.” Seven of the 22 questionnaire responses refer to this recommendation. Several responses link the question of applicability of the supply chain recommendation more to the feasibility of “direct influence” than to investment per se. Foreign direct investment gives rise to control (and, therefore, direct influence) but direct influence can stem from other circumstances as well: • Structural characteristics (e.g. market power). As suggested by the commentary, companies having market power vis-à-vis their suppliers may be able to influence business partners’ behaviour even in the absence of investment giving rise to formal corporate control. • Other business practices (e.g. certification and product tracing systems). Some market arrangements are designed to ensure supplier accountability for particular aspects of performance (often product quality). For example, aircraft manufacturers employ purchasing practices that permit them to control the quality of parts they buy from suppliers – even if transactions take the form of arms length market purchases. They do this through quality standards, supplier certification and product tracing systems. Such arrangements involve investments in standards, certification and tracing systems, but the supplier-purchaser relationship itself does not involve investment in the traditional sense of foreign direct investment.

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The Declaration does not contain a precise definition of investment. The Guidelines’ Preface states that: “International business has experienced far-reaching structural changes and the Guidelines themselves have evolved to reflect these changes. […] Multinational enterprises, like their domestic counterparts, have evolved to encompass a broad range of business arrangements and organisational forms. Strategic alliances and closer relations with suppliers and contractors tend to blur the boundaries of the enterprise.” In this context, definitions of business activities such as investment may be quite broad. This suggests that there may be room for flexibility in assessing multinational enterprises’ influence and the presence of an investment relationship in the supply chain, depending on the specific circumstances. At the June 2002 Roundtable, some participants noted that it is often possible for companies to influence supply chain outcomes even if they choose not to do so. In particular, representatives from trade unions and NGOs pointed out that companies can choose to “engineer processes” so as to control supply chain outcomes and can structure their relations with suppliers so as to obtain “power and leverage”.2 If this view is accepted, then supply chain recommendation would appear to apply not just to actual business situations in which influence is possible, but also to those where it is reasonable to expect the business in question to engineer its processes and to structure its relations with business partners and suppliers in such a way as to be able to influence them. BIAC, while recognising the validity of this point, stressed the need to consider legal concerns and potentially large economic costs. Thus, NGOs’ and trade unions’ views imply that the potential applicability of recommendation II.10 is very wide indeed. I.4. International investment officials entrusted to implement the Guidelines The Guidelines are not only a set of recommendations – they also have distinctive implementation procedures. The June 2000 Council Decision commits adhering countries “to further the implementation of the recommendations contained in the text of the Guidelines”. The Decision calls on the CIME and the National Contact Points to undertake certain activities (e.g. promotion, handling enquiries, meeting annually and reporting). Two responses to the questionnaire note that, if it is decided that the Guidelines cover a broader range of activities – trade, for example – it might be reasonable to involve other policy groups (e.g. the OECD Trade Committee or the World Trade Organisation) in their implementation.

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The resources available to international investment officials are also a consideration. In responding to the questionnaire, one delegation notes that: “including pure trade as relevant to the Guidelines would likely increase the workload of the NCP in a manner that may undermine their effectiveness.” Since the 2000 Review, these resources have included the costs of each of the 37 National Contact Points

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Background Paper on the Scope of the Guidelines

(who, under the revised Guidelines, were given expanded responsibilities) and the OECD Secretariat administrator time plus associated managerial and secretarial overhead. On a number of occasions, NCPs, CIME Delegates and the OECD Secretariat have noted the growing resource costs of the Guidelines. While resources for Guidelines implementation could be expanded, they will always be a constraint on the amount of implementation that can take place – this may place a practical limit on the scope of the Guidelines implementation procedures.

Notes 1. See page 54 of the 2001 Annual Report on the OECD Guidelines for Multinational Enterprises. 2. See the 2002 Annual Report on the OECD Guidelines for Multinational Enterprises, page 69.

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Background Paper on NCP Procedures I.

Introduction

The question of National Contact Point (NCP) procedures arose on several occasions during the June 2002 NCP meeting, consultations and Corporate Responsibility Roundtable. The Committee on International Investment and Multinational Enterprises (CIME) and its Working Party on the Declaration discussed the issue several times during the year – delegates shared information about individual NCP practices, discussed them in the NCPs’ Electronic Discussion Group, and developed and responded to a questionnaire. It was decided that limiting the questionnaire to procedures with respect to specific instances would give a useful focus to the responses without precluding sharing of information on other procedural matters at some future date. NCPs’ replies to the questionnaire were compiled and discussed at the April 2003 meetings. This paper summarises these discussions and the questionnaire responses. NCP responsibilities and procedures for dealing with specific instances are set forth in the June 2000 Decision of the OECD Council in the form of “Procedural Guidance” and in its associated Commentary. The Procedural Guidance establishes that “NCPs will operate in accordance with core criteria of visibility, accessibility, transparency and accountability to further the objective of functional equivalence.” In their ongoing consideration of NCP procedures, Working Party delegates stressed that they do not intend to revise these procedures, but rather to gather information about what NCPs are doing in practice and to learn from each others’ experiences. Part II provides an overview of the responses. Part III then describes the content of the responses, which are organised under the following headings: Individual NCP written procedures or guidance; Initiating specific instances; Acknowledging receipt; Measures to promote timeliness and efficiency; Responsibility for information provision; The role of national legal, regulatory or administrative procedures; Measures promoting communication and transparency;

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Handling of confidential information; Consistency of findings across NCPs; Solicitation of feedback, training and further opportunities for experience sharing. II.

Overview of the questionnaire responses

Twenty three NCPs responded to the questionnaire. The European Commission also submitted a response, though it is not an NCP. The questionnaire responses fall into two groups – those provided by NCPs that have already accumulated some experience in dealing with specific instances (12 respondents, referred to as “experienced NCPs” in what follows) and those provided by respondents without any specific instance experience(12 respondents: 11 NCPs referred to as “non experienced NCPs” and the European Commission). Non-experienced NCPs provided responses based on policies they have developed and/or the procedures they propose to use in dealing with specific instances that they might confront in the future. Experienced NCPs’ responses are based both on actual experience and on policy. Acknowledging the value of the various kinds of responses, the Working Party asked the Secretariat to include both types in the synthesis paper, but, where relevant, to make clear the distinction between what NCPs have actually been doing, and what they intend to do. The rationale for the distinction sought included the belief that sometimes procedures prove unworkable when tested and therefore have to be revised. Two NCP responses arrived too late to be included in these tabulations. Responses to the questionnaire on NCP procedures were received from sixteen single government department NCPs, four NCPs that consist of multiple government departments, two NCPs that are tripartite in structure and one quadripartite NCP. Twelve of the respondents had already received one or more specific instances (note that not all NCPs responded to the procedural questionnaire). These 12 NCPs had dealt with a total of 25 specific instances at the time they completed the questionnaire in March 2003. III. Procedural themes from the questionnaire This part of the paper summarises the responses received to the questionnaire on NCP procedures, as well as related preliminary discussions, under the procedural themes developed in the questionnaire. Individual NCP written procedures or guidance

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Written procedures setting out standards for the handling of specific instances are included in the Procedural Guidance to the Guidelines. Elaboration of these procedures is provided by the Commentary on the Implementation Procedures. The questionnaire responses suggest that NCPs are broadly satisfied

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Background Paper on NCP Procedures

with the Procedural Guidance and confident that it provides a useful basis for managing specific instances. None expressed dissatisfaction with the Procedural Guidance. Eleven (5 experienced, 6 non-experienced) indicated that they relied only on the Procedural Guidance (though one indicated that individual procedures are needed). One non-experienced NCP indicated that it “would prefer to handle matters on a case-by-case basis”, and that “[p]rocedures and policies could be developed after some experience has been gained”. Other NCPs (5 experienced NCPs and 3 non-experienced NCPs) have developed additional procedures or have elaborated the Procedural Guidance to assist them in handling specific instances and/or for the benefit of the public. In some cases, these are made available on the relevant NCPs website. Three NCPs mentioned that they were in the process of developing procedures. Initiating specific instances There appears to be broad support among NCPs that specific instances can be raised by a wide array of interested individuals and organisations. In answer to the question : “Does the NCP have views on which organisations or individuals may request consideration of a specific instance (e.g. May both domestic and foreign parties raise instances? May all interested parties or only particular organisations such as trade unions raise instances?)?” – responses from experienced NCPs included “everyone”, “no formal restriction,” “we keep an open mind towards any bona-fide request,” and “any domestic individual or organisation representing such individual affected directly or indirectly by the specific instance”. Some examples of responses from non-experienced NCPs included “all interested parties”, “any interested parties” and “requesting parties should have a legitimate interest in the issue, determined on a case-bycase basis”. Some NCPs are still considering this issue: five NCPs (4 experienced, 1 not) indicated that they had not (yet) formed a settled view on this question, and one other experienced NCP indicated a desire for more information on the practices of other NCPs in this regard. In response to the question “Does the NCP provide guidance on how specific instances should be submitted (e.g. what kind of documentation and justification should be provided)”, ten NCPs responded affirmatively. Of these, five were experienced NCPs and five were non-experienced NCPs. Two additional NCPs (1 experienced, 1 not) indicated that they were preparing guidance material. Little information was provided as to what the guidance consists of. However, two of the respondents explicitly mentioned that they had prescribed a format for the initiation of specific instances to assist individuals and organisations wishing to raise specific instances to know what information they should provide. Notwithstanding

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the format they had developed, these NCPs stated, in their responses to the questionnaire, that they were willing to entertain specific instances raised in other formats, for example, letters. None of the respondent NCPs have initiated their own specific instance. In response to the question “Has the NCP undertaken consideration of any specific instance on its own initiative?”, all responding NCPs answered No. There appeared to be difference of views as to whether it is possible for NCPs to initiate their own specific instances. One of the non-experienced NCPs stated that it considered the initiative belonged to civil society, while another non-experienced NCP stated that “[i]n principle [the NCP] can do it, if it is necessitated by the circumstances”. Another response stated that “[NCPs] should have the possibility to do so”. One other experienced NCP replied “[i]nsofar, as we observe cases that may later become a specific instance”. The only other elaboration was provided by an experienced NCP that responded “No (but it may)”. Acknowledging receipt All of the experienced NCPs stressed the importance of acknowledging receipt of a specific instance to the individual or organisation that raised it. One experienced NCP mentioned that it acknowledges receipt with a letter. Another experienced NCP indicated that its policy on this was “under construction”. One non-experienced NCP stated that, since it is government body, “every request is registered and handled as an official document”. All would inform the company concerned if the specific instance appears to have some merit. Two NCP respondents (1 experienced, 1 not) indicated that they would not inform the company about the existence of the specific instance if it clearly lacked substance. One non-experienced NCP, which has developed deadlines for itself for the handling of specific instances, indicated its intention to “be in contact with the MNE concerned as soon as practicable within the 30 day limit allowed under the [name of NCP] Service Charter for considering whether to proceed with a specific instance”. Measures to promote timeliness and efficiency

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There is broad agreement in principle that timeliness in handling a specific instance is important. However, some NCPs observed that timeliness might be relative to the type of specific instance under consideration and/or might depend on the efficiency of others beyond their control, including the parties themselves and sometimes other offices within the government. There may also be unexpected or unavoidable delays. For example, one NCP found that its efficient handling of a specific instance was impaired because of a reorganisation of the NCP. Suggesting that appropriate steps might vary with the nature of a particular specific instance,

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two experienced NCPs responded that the particular measures taken depend on the case under consideration. Another experienced NCP qualified its commitment to timeliness with the statement “as far as this possible”, while yet another observed that “it takes time to gather answers”. Although nine experienced NCPs responded affirmatively to the question “Does the NCP take steps to ensure that the specific instance is handled in a timely manner”, little detail was provided about what steps are being taken. However, one non-experienced NCP responded that it has imposed deadlines on itself: it commits itself to “responding to the issue raised within 30 days of receipt and, if necessary, to undertaken an assessment of the issue raised within a further 90 days”. Another non-experienced respondent proposed a specific timeframe: “the NCP should answer within 60 days (45 working days).” Without mentioning explicit deadlines, two other experienced NCPs stated that “A prompt handling is ensured by law” and “The NCP is obliged to handle the specific instance in a timely manner”. However, highlighting that sometimes procedures can prove unworkable in practice and may need revision, another experienced NCP responded that “Despite the existence of such steps [to ensure timeliness], it is not workable”. Another non-experienced NCP responded that “Until specific instances are considered, a definitive answer is not possible”. One experienced NCP indicated that it sometimes requests parties to respond within certain timeframes: “In certain specific instances, as we have approached a decision, we have asked participants to provide additional information by a given date.” Similarly, one non-experienced NCP stated that, since it is itself a government body, it can only impose deadlines on “similar bodies and organisations”, but that, in the case of other actors, deadlines will be established and parties will be “politely asked” to respect them. Responsibility for information provision Eleven respondents (including 5 experienced NCPs) agreed that the primary responsibility for information provision rested with the parties, that is, the individual or organisation that raised the specific instance, and the company or companies concerned. Three NCPs (2 experienced, 1 not) responded that the main responsibility rested with the party that raised the specific instance. Two NCPs (both non-experienced) responded that the main responsibility for information provision depended on the specific instance at hand. Four NCPs, all of which were experienced, responded that the main responsibility for information provision was “shared”. Six respondents (including 3 experienced NCPs) noted the ability of NCPs to conduct their own investigation and seek information from other persons and bodies. Three NCPs (2 experienced, 1 not) explicitly mentioned the possibil-

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ity of obtaining information from other parts of the government. One non-experienced NCP mentioned the possibility of consulting with other NCPs. No consensus emerged from the questionnaire responses as to what information or how much is needed to raise a specific instance. However, as already indicated above, some NCPs provide guidance (and/or intend to do so) as to what kinds of information or “proof” is necessary or desirable. Seven of the 12 experienced NCPs have dealt with specific instances involving alleged conduct in non adhering countries. Two of these observed that information gathering had been a problem in such cases. Such problems included language and technical communication difficulties, as well as obtaining information about a trial ongoing in one of the non-adhering countries concerned. As a possible means of addressing such problems, one questionnaire response suggested that at least some information gathering problems in non-adhering countries might be ameliorated through use of diplomatic networks, such as embassies or consulates in the countries concerned. The role of host country legal, regulatory or administrative procedures Nine of the twelve experienced NCPs responded affirmatively to the question “Did the specific instance involve business conduct that was covered by host country laws, regulations or administrative procedures?” Thus, it appears to be quite common that NCPs consider specific instances that are covered by host country law and procedures. Parallel legal, regulatory or administrative procedures. NCPs differed in their response as to whether the fact that a specific instance concerned business conduct covered by legal, regulatory or administrative procedures would influence their approach to a specific instance. Nine experienced NCPs felt that it could or has already influenced decisions. For example, one experienced NCP was confronted with a specific instance that concerned business conduct that was also the subject of legal proceedings. In this situation, this NCP felt that it could not proceed in dealing with the specific instance. Another experienced NCP felt that national legal, regulatory or administrative procedures would not affect their decision. Yet another experienced NCP responded that such procedures could have an impact on their decision, but that it would depend on the situation at hand.

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Six non-experienced NCPs felt that the fact that a specific instance concerned business conduct covered by other national procedures would influence their decision. One non-experienced NCP responded that it “encourages complainants to address their complaints/issues with the MNE directly and with the appropriate regulatory/legal authorities (where applicable) prior to lodging a complaint with the NCP”, and “We would expect that any outcome from discussions/proceedings

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with appropriate regulatory or legal authorities would be considered in an assessment by the NCP, but would not necessarily determine the NCP’s final decision”. Measures promoting communication and transparency Keeping parties informed. Two thirds of respondents agreed that it was desirable to keep the parties informed of progress in the handling of the specific instance. Of these, eleven were experienced NCPs. However, no information was provided as to how and with what frequency this is being done. Three of the responses were qualified with words such as “to the extent necessary”, “as appropriate” and “if it is needed”. One of the responses suggested the desirability of informing the parties even when there had been no substantial progress so that the parties would know that the NCP was still working on the matter. Provision of information to actors not party to the specific instance. A number of NCPs indicated they would be willing to provide information to parties not directly involved with the specific instance (e.g. Parliament), if there was a legal obligation to do so and/or where it was consistent with rules or policies concerning the handling of confidential information. Two NCPs (1 experienced, 1 not) mentioned legal obligations as the main consideration governing the provision of information to non parties. An experienced NCP emphasised that it protects the names of the parties in such situations. One non-experienced NCP emphasised that the provision of information to non parties would be decided on a case by case basis, but that Parliamentary questions are always answered. Another non-experienced NCP mentioned that it was a developing a policy on this issue and that confidentiality concerns would be key. Some NCPs (3 experienced, 1 not) indicated that they had reporting or information sharing mechanisms under which they may report on their progress to another government department or seek advice from other officials and sometimes also stakeholders, like NGOs, in a confidential environment. In some countries, freedom of information legislation may apply to some or all of the documents involved in the handling of the specific instance, implying that NCPs may have a legal obligation to make them public. One experienced NCP and one non-experienced NCP mentioned this possibility explicitly in their questionnaire responses. Publicity in connection with submission of a specific instance. In response to the question “What is the policy regarding publicity in connection with the submission of a case”, no detailed policies were outlined. However, eight respondents (5 experienced NCPs) explicitly mentioned confidentiality concerns in their responses, implying a reluctance to publish such information. Another concern that featured in some of the responses was the need to protect the integrity and effectiveness of the process. One respondent without specific instance experience stated: In principle, when a case is opened in the NCP, it should be made public that such a case has been opened (e.g. via the NCP website). However, it might not be appropriate in some cir-

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cumstances, and some exceptions to this rule might occur (e.g. when publicity about the opening of a case would endanger its resolution by possible destruction of proofs or danger for the security of persons, etc.). An experienced NCP responded that “any public statement on behalf of the NCP should build on consensus of the parties involved”. Another experienced NCP stated that “We have not generally publicized the fact that a case has been submitted”. One non-experienced NCP indicated that it was developing procedures, but that the intention was to release information, where possible, subject to the need to protect confidential information. Public statements while a specific instance is being considered. NCPs provided more detailed information on their views on making public statements during the consideration of a specific instance. In response to the question “Does the NCP have a view on whether information on specific instances should be made public while they are still being considered”, a variety of positions were articulated, but, once again, there appeared to be broad agreement that protecting the confidentiality and integrity of the process were paramount. Seven respondents used a variant of the term “confidential” in their responses. Fourteen NCPs (8 experienced, 6 not) indicated a reluctance to release any information at all during the consideration of a specific instance. Four NCPs (2 experienced, 2 not) explicitly referred to the Procedural Guidance in responding to this question. Two experienced NCPs expressly mentioned an inverse relationship between publicity and the resolution of specific instances: one suggested that publicity might inhibit the resolution of the specific instance, while the other stated that confidentiality may enhance it. One experienced NCP noted its intention to make public only the existence of a specific instance. Another experienced NCP made a similar suggestion: “basic information that the specific instance is [being] handled could be made available…” Yet another experienced NCP stated that “Information would be made public with the consent of the participating parties, preferably at the conclusion of the instance”. Another respondent without experience in dealing with specific instances suggested that the procedural steps taken in handling a specific instance could be published on the NCP website in a way that would still preserve the confidentiality of the content of the case. To invite a broad range of responses, the question had not specified whether it was referring to public statements by the NCP, the parties or both. Focusing on the issue of publicity by the parties, one experienced NCP stated that the parties are entirely responsible for their own statements, and another experienced NCP noted that it does not ask the parties to limit their statements.

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Publication of outcome if no agreement is reached on a specific instance. A number of NCPs indicated that they supported the idea of making a public statement where no agreement was reached between the parties. Four experienced NCPs and two

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non-experienced NCPs responded affirmatively to the question “If the parties do not reach agreement, does the NCP make a public statement?” A more qualified response was given by another experienced NCP, which indicated that it would make such a statement “provided there is necessity to respond to public statements or reports, or such a statement is seen as useful by the NCP”. A case-by-case approach was also preferred by one of the non-experienced NCPs. Three respondents (including 1 experienced NCP) mentioned the Procedural Guidance in their response. Three experienced NCPs explicitly mentioned that they had not yet encountered a situation where no agreement was reached between the parties. Publishing outcomes of specific instances. Half of the respondents support the idea of making public the results of the process subject to confidentiality concerns and/or whether it will promote effective implementation of the Guidelines. In response to the question “Does the NCP undertake to make public the results of its consideration of a specific instance”, eight experienced NCPs and four nonexperienced NCPs provided an affirmative response (albeit qualified in some cases). Qualifications mentioned by two experienced NCPs were: “provided [there is] consensus”, and “unless preserving confidentiality is in the best interests of effective implementation”. Similarly, two non-experienced NCPs indicated that they would decide the issue of publishing the results on a case-by-case basis. Another non-experienced NCP indicated that it was developing a policy that would favour release of information but would also take into account the need to protect the confidentiality of some information. Two respondents referred to the Procedural Guidance and/or Commentary as shedding light on the question of the publication of results. Two experienced NCPs responded “No” and one other “Not yet”. A number of respondents provided no response to the question. Some of the means that have been (or are planned to be) used to make public the outcome of a specific instance include press releases (mentioned by 8 respondents), annual reports (mentioned by one respondent), and statements on the NCP’s website (mentioned by 7 respondents). Another mechanism, suggested by one NCP, was a notice in the official government gazette. Half of the experienced NCPs had decided not to consider one or more specific instances and 4 of these did not publish their reasons for doing so. A variety of opinions was expressed in response to the question “Does the NCP publish its reasons for deciding not to consider a specific instance?”. One experienced NCP stated that they might publish their reasons if the consensus of the parties was obtained. Another experienced NCP suggested that they might publish the reasons if the circumstances warranted it. Two other experienced NCPs explicitly mentioned that the parties concerned had been informed of the reasons. It was not clear from the responses whether the other experienced NCPs that responded “No” had informed the parties concerned of the reasons, or whether their

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response referred only to publication more broadly to others beyond the parties to the specific instance. Five of the non-experienced NCPs indicated that they would provide the reasons to the parties concerned and/or publish the reasons, at least in some circumstances. Two non-experienced NCPs mention a national requirement that it justify its decision. One non-experienced NCP indicated that its intention was to decide whether to publish its reasons for deciding not to consider a specific instance on a case-by-case basis and that the primary factor to be taken into account would be “a judgement as to whether publishing would enhance the overall effectiveness and credibility of the Guidelines”. It anticipated that “[i]n most cases… publishing would be appropriate”. The questionnaire asked “Does the NCP publish the name of the company involved?”. A mixture of responses was received. Five of the experienced NCPs indicated that they had published or would publish the company’s name. One other experienced NCP responded that naming would depend on whether the consensus of the parties had been obtained. Four other experienced NCPs responded in the negative. One other responded “no decision taken yet”. Six other respondents without specific instance experience indicated either support for the publication of company names or a preference for a case-by-case approach depending on confidentiality concerns, the company’s consent, and/or what will best promote effective implementation of the Guidelines. One further non-experienced NCP responded “in principle, no”, that is, it would not publish company names. Handling confidential information Two experienced NCPs mentioned having encountered confidential business information thus far in dealing with specific instances. Nevertheless, a variety of responses were received to the question “What steps does the NCP take to protect sensitive business and other information”. The Procedural Guidance, which provides, among other things, that “While the procedures under paragraph 2 are underway, confidentiality of the proceedings will be maintained”, was mentioned by three experienced NCPs as providing direction in this regard. A number of NCPs indicated that they would not reveal such information, especially during the specific instance process, to persons other than the parties concerned. One experienced NCP stated that it treats all information received as official use only. Four NCPs mentioned that they are or would be guided by administrative rules and/or legal procedures for the handling of confidential information that are already in place across the government generally. Another respondent suggested ensuring that the information is adequately protected on the NCP’s premises, as well as asking parties to make a written commitment to respect the sensitivity of the information provided. 54

It appears that NCPs generally provide (or intend to do so) information received from the person who raised the specific instance with the company con-

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cerned and vice versa. Eight experienced NCPs indicated that they shared information provided by the company with the other parties to the specific instance. One of these eight indicated that they required the agreement of the company concerned before sharing the information, another mentioned confidentiality rules that were still to be defined but would govern the handling of sensitive commercial information. Five other respondents without specific instance experience indicated that they would share company information with the other parties, at least in certain circumstances, for example, where it would be consistent with concerns to protect the confidentiality of certain information, with the company’s agreement or after consultation with the company, unless the company provided substantive grounds why the information should not be shared, where it is “essential” for understanding the situation, and/or on a case by case basis. In response to the question “Is the company concerned given a copy of all documents submitted by the organisation or individual making the request” eleven experienced NCPs provided an affirmative response. Of these, one experienced NCP mentioned that it did so where “relevant”, while another mentioned that it did so “subject to the agreement of the submitting organisation”. Two nonexperienced NCPs indicated that they relied on the initiator of the specific instance to indicate which information could and could not be released. Confidentiality concerns were also mentioned by another non-experienced NCP as a reason for not providing all such documents to the company. Another non-experienced NCP indicated its intention to adopt a case-by-case approach, but that transparency was its goal. Consistency of findings across NCPs A number of views were expressed on the question whether any problem was posed by different NCPs reaching different decisions as to the merit of similar specific instances. A preference for consistency, all other things being equal, was expressed by ten of the respondents. However, one NCP observed that two specific instances are rarely, if ever, the same: “No two specific instances can be identical. What should be avoided is divergence in the interpretation of the Guidelines.” Six other NCPs also observed that different outcomes could result from such things as different background facts and circumstances, including different domestic circumstances and policies. One such NCP stated that “The Guidelines were designed to be flexible and adaptable to different domestic circumstances and policies”. That same NCP noted that it is possible that the same specific instance could fall into the jurisdiction of more than one NCP. To promote a higher degree of consistency, three NCPs suggested that NCPs dealing with similar specific instances could perhaps coordinate and cooperate with each other. The possibility of discussing the issue in future meetings was also

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floated. Some NCPs have already co-operated with other NCPs in the context of dealing with a specific instance. Eight experienced NCPs indicated that one or more of the specific instances they had handled involved another NCP in some way. In some cases, the result was the transfer or referral of a specific instance to another NCP for handling. Whatever measures are adopted to enhance consistency, the importance of maintaining NCPs’ independence was also stressed. Solicitation of feedback, training and further opportunities for experience sharing Five of the experienced NCPs indicated their openness to feedback, responding affirmatively to the question “After consideration of the specific instance, does the NCP seek feedback from the parties to the instance about its handling of the process?”. Four others responded “not yet”. One other experienced NCP noted that feedback has been freely supplied by the parties without the need to formally solicit it. No other specific information was provided about how feedback is being obtained. Five non-experienced NCPs indicated that feedback is something they would be interested in receiving. Some NCPs expressed a desire for training and/or more opportunities for learning from those NCPs that have dealt with more specific instances, including through the use of case studies. While some NCPs would like to learn from more experienced NCPs now, others felt that such learning opportunities might be more useful later on, once they had encountered some specific instances of their own. NCP and WPD meetings and the EDG were mentioned as fora that already afford opportunities for sharing lessons learned from handling specific instances.

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Archive of Communications

Note by the Secretariat: This section reproduces material related to the implementation of the Guidelines which was published between June 2002 and June 2003. The views expressed are those of the authors, and do not necessarily reflect those of the Organisation or of its member countries.

Document 1. Extractive Industries Transparency Initiative Multi-stakeholder Conference. Document 2. Informal Roundtable on Corporate Responsibility in the Global Economy – Summary. Document 3. Joint statement by the Netherlands National Contact Point, Adidas and the India Committee of the Netherlands. Document 4. Statement from the Swedish National Contact Point for OECD Guidelines for multinational enterprises with reference to specific instances received concerning Atlas Copco and Sandvik. Document 5. Exchange of letters on Democratic Republic of Congo. Document 6. Exchange of letters on co-operation between Global Reporting Initiative and OECD Secretary General.

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Document 1

Extractive Industries Transparency Initiative Multi-stakeholder Conference London, 17 June 2003

OECD Committee on International Investment and Multinational Enterprises Statement by Marinus Sikkel, Chair As Chair of the OECD Committee on International Investment and Multinational Enterprises, I am pleased that the OECD is participating in today’s conference. The general principles of transparency and accountability underpinning the Extractive Industries Transparency Initiative (EITI) are essential to achieving the international community’s goal of promoting integrity and sustainable growth in the global economy. The recent G-8 Declaration on Fighting Corruption and Improving Transparency places the fight against corruption and the push for transparency in the context of promoting sustainable development and stronger investment climates in developing countries. The OECD fully subscribes to this goal and the recognition of the important steps governments must take to enhance transparency. It also recognises that multinational enterprises can make an important contribution to the sustainable development of the countries in which they operate and considers that enhanced transparency by multinational enterprises should go hand in hand with improved public sector governance. OECD’s on-going activities in such areas as combating bribery and corruption, promoting improved corporate governance and encouraging corporate responsibility all complement EITI’s efforts to enhance transparency: • The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions requires each signatory to criminalize the bribery of foreign public officials by companies based in its territory. The Convention, and related OECD Recommendations, provides a broad blueprint for eliminating the pernicious practice of foreign bribery by companies to obtain or retain business in other countries.

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• Improving corporate governance is another area where the OECD makes a distinctive contribution. The OECD is currently exploring how the OECD Principles of Corporate Governance can be applied to state owned assets. This project is of obvious interest to the many state-owned oil and mining companies, whose governance practices also form important parts of the broader transparency picture in extractive industries. • Transparency is also one of the themes of the OECD Guidelines for Multinational Enterprises. The OECD Guidelines are voluntary recommendations to multinational enterprises which are applicable world-wide. All OECD governments, the European Commission and a growing number of non-OECD governments are committed to their effective implementation. They are supported by follow-up procedures which allow discussion among governments, business, trade unions and NGOs of issues relating to implementation of the Guidelines and clarification where needed of the meaning of the Guidelines in specific circumstances. As part of its work under the Guidelines, the CIME concluded a study on the challenges facing extractive industries as they operate in regions characterised by conflict and widespread human rights abuses. The study’s findings are consistent with the premises underlying EITI; it also contrasts contracting practices in OECD and non-OECD countries and highlights the importance of host government observance of fiscal control standards as well as good governance of state-owned enterprises which are partners of extractive industry foreign companies. I am glad that the OECD has been given opportunity to participate in preparatory meetings for EITI. I believe that co-operation should continue, consistent with our institutions’ respective functions, mandates and procedures.

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Document 2

Informal Roundtable on Corporate Responsibility in the Global Economy – Summary Paris, 4 April 2003

On 4 April 2003, the Secretary General of the Organisation for Economic Cooperation and Development convened a small informal Roundtable on corporate responsibility in the global economy. The objective of the Roundtable was to take stock of progress, to explore ways of enhancing international co-operation in the field of corporate responsibility and to look at how the effectiveness and visibility of the OECD Guidelines for Multinational Enterprises might be enhanced. I.

Corporate responsibility in the global economy

The current global economic context is one of intense activity in the corporate responsibility field. This activity involves a variety of actors – companies of all sorts, business associations, trade unions, NGOs governments and international organisations – and has given rise to a diverse array of outputs – company codes, industry codes, global instruments and management and reporting standards. Boom or durable phenomenon? Indeed, this activity is so intense that some participants expressed concern that it might reflect a corporate responsibility “boom” – a reference to acyclical, temporary phenomenon. One reason for this concern was the recent shift from a dynamic global economic situation to a more sombre macroeconomic and geopolitical picture. Despite these concerns, the discussion suggested that corporate responsibility is an issue that is here to stay. Participants stressed that the current intense interest in corporate responsibility is part of an ongoing, well established trend toward more sophisticated treatment of these issues by companies. One participant noted an acceleration of activity since 1995, citing progress in such areas as governance, anti-corruption, environment, socially responsible investing and reporting.

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The “plethora of codes” and signs of convergence While the intense activity in this field is encouraging, it has also led to a “plethora” of codes. Some participants indicated that this could lead to confusion among managers and to accusations of “code shopping”. A corporate responsibility manager at a major multinational enterprise noted that his company handled this problem by integrating the principles and ideas expressed in outside instruments into the internal documents his company uses to communicate with its employees. Under this approach, field managers are confronted with a single company policy and are not asked to decide from among competing codes. The company also publishes the names of the codes and initiatives it is involved in. Evolution, progress and consolidation Many participants highlighted the underlying unity of purpose and principle of many of these codes, which reflect in various ways the same framework of international declarations and principles. Several participants’ reinforced OECD research findings by noting that a gradual process of convergence of code content appears to be taking place, at least in some areas (e.g. treatment of core labour standards). Thus, at least among the major corporations that issue codes, there are indications of progress in the construction of a common view of appropriate business conduct in some areas. Credibility of most codes is still an open question One participant expressed concern about there being “too many codes and not enough enforcement”. Thus, despite intense activity and some signs of progress, the credibility of codes of conduct continues to be an important concern. Participants noted that the credibility of the codes is closely linked to the perceived strength of the pressures and incentives that motivate companies to take them seriously. Although there was a convergence of views on the “business case” for corporate responsibility (e.g. lower capital costs, improved employee and customer loyalty, improved ability to compete in labour markets, enhanced risk management), participants felt that the strength of this case varied by company, sector and issue. The lack of credible monitoring services was cited as a problem. Several participants noted that in situations where overall governance is weak – e.g. in countries such as Myanmar or the Democratic Republic of Congo – putting together a credible corporate responsibility programme can be very difficult. The search for an appropriate allocation of roles between government and business 62

Roundtable participants agreed that companies should not be put in a position where they have to assume roles that governments are unable or unwilling to

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assume. This recalls the many previous Guidelines discussions in which all actors – business, trade unions and NGOs – have agreed about the need to strengthen interaction among the different groups to make the Guidelines work. In this context, participants also stressed binding and non-binding instruments like guidelines, principles and conventions are clearly complementary to existing regulatory frameworks. Finding the right mix of policies and business practices is now widely recognised to be the real challenge. In this respect, the discussion pointed to an unmet demand for “services” in the corporate responsibility field – services that would help companies and other actors put together credible initiatives and helping them to distinguish between their responsibilities and those of governments. II.

Responding to the challenges: the emerging role of the OECD Guidelines

The Guidelines – A step in the right direction and a need for further progress The view of an NGO representative sums up, perhaps, the tenor of the discussion about the Guidelines – he stated that “the Guidelines are an important step in the direction that we want to go”. Adhering governments – working with business, trade unions, NGOs and non-member governments – have made progress in realising the Guidelines’ potential. For example, whereas only two National Contact Points could be characterised as having been functional prior to the 2000 Review, almost all of the National Contact Points are now operating. The specific instance procedure is being used extensively. However, Roundtable participants also noted that the Guidelines are very much a work in progress – “all actors still have a long way to go”. Who is the Guidelines’ audience? It was noted that CEO support for the integration of the Guidelines into the management process is crucial. Another important entry point of the Guidelines into a company’s management process is the corporate responsibility officer or office. This office will try to pass its message among the factions and profit centres that make up any reasonably large company. Its message will be competing for attention with other messages, concerns and pressures. Seen from this perspective, the role of the Guidelines is to strengthen the hand of these “champions” of corporate responsibility in influencing the day-to-day operations of business. According to several participants, small and medium sized enterprises should be an important audience for the Guidelines. Most major multinational enterprises already have reasonably advanced systems for dealing with corporate responsibility issues, whereas small and medium sized enterprises are far less likely to have such systems. The Guidelines could help bring this group of compa-

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nies along. Similar views were expressed with respect to companies based in nonmember countries. Thus, the development of communications channels with smaller multinational enterprises and with non-adhering governments were deemed to be high priorities for Guidelines implementation. Future challenges for Guidelines’ institutions and implementation Participants identified a number of areas for future improvements to Guidelines implementation: • Promotion. Awareness of the Guidelines remains a problem, though it was also noted that this seems to be a general problem with major instruments of relevance to corporate responsibility. • Transparency of NCPs and accessibility of information on specific instances. • Functional equivalence. Unevenness of NCP implementation, with a possible need to strengthen outside review of NCP performance as well as existing peer reviews of NCPs’ functions and performance. In terms of the focus of Guidelines implementation, the following areas were identified as being potentially helpful: • Documenting the business case for corporate responsibility. • Promoting corporate responsibility among small and medium sized enterprisesengaged in international investment. • Dialogue on the application of the Guidelines and corporate responsibility issues with non-member countries. • Continuing work on corporate responsibility issues in the supply chain in developing countries. • Providing assistance to companies working in weak governance zones – helping them to evaluate whether or not their behaviour is appropriate and providing protection in cases of extortion. • Creating a corporate responsibility tool kit for use in institutions of higher education (e.g. schools of business and public administration and law schools) which provide access to the “next generation of business leaders”. • Making use of existing labour relations processes to improve the effectiveness of the Guidelines. • Using professional associations to raise awareness of the Guidelines. 64

• Improving understanding of what some of the general principles set forth in the Guidelines recommendations mean in particular business situations.

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III. Building international co-operation Roundtable participants stressed that the division of labour among international organisation and global corporate responsibility instruments should be respected when trying to strengthen international co-operation. For example, participants noted the following features distinguishing three global corporate responsibility instruments: • The UN Global Compact’s impetus stems largely from the authority of the United Nations Secretary General and the endorsement by individual companies. • The Global Reporting Initiative offers a reporting framework based on normative principles that are fully compatible with those expressed in the Guidelines. • The OECD Guidelines are a relatively detailed code of conduct with the formal backing of 37 governments representing countries, from which the bulk of international investment originates and which are home to most major multinational enterprises (e.g. 97 of UNCTADs list of top 100 multinational enterprises). They are also based on a consultative process involving business, trade unions and NGOs. Participants held varying views on how such cooperation might be organised – some proposed creating a permanent consultation process, while others thought an ad hoc, issue-specific approach (e.g. exploring the meaning of corporate responsibility in specific business contexts) would be more promising. In addition, partnerships with other organisations were proposed – including with the World Trade Organisation, the World Bank and the G8. The World Trade Organisation’s potential interest in the Guidelines in the context of the Doha negotiations was mentioned on a number of occasions, although the question on how the Guidelines might be used in such a context remained open. Finally, the G8 – seven of whose members adhere to the Guidelines – was cited as an organisation that might want to follow the process of the implementation of the Guidelines and other instruments to show that its members “lead by example”.

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Document 3

Joint Statement by the Netherlands National Contact Point, Adidas and the India Committee of the Netherlands 12 December 2002

The issue raised by the India Committee of the Netherlands (ICN) whether Adidas behaves in conformity with the OECD Guidelines for Multinationals has been finalised by the Netherlands National Contact Point (NCP). The NCP is the government body that promotes the effectiveness of the Guidelines, i.e. a set of recommendations by governments to multinational enterprises to operate in a socially responsible manner. NCP’s role to contribute to the resolution of this issue has been successful. ICN and Adidas both pursue the internationally accepted labour standards and communication between them has been established. NCP will step back from hereon, but may be asked to step back in by either ICN or Adidas in the event that communication between them breaks down. A joint statement regarding this specific instance follows below. THIS IS A JOINT STATEMENT BY THE NCP, ADIDAS AND ICN: “Agreement between ICN and Adidas in NCP procedure” The Netherlands National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises (the Guidelines), Adidas and the India Committee of the Netherlands (ICN) have reached an agreement on the question raised by ICN whether Adidas’s behaviour as an outsourcer and seller of footballs produced in India is in conformity with the Guidelines. According to ICN, Adidas failed to encourage its supplier to produce in accordance with the OECD Guidelines. ICN based its question on its report “The Dark Side of Football – Child and adult labour in India’s football industry and the role of FIFA (June 2000)” and subsequent fieldwork to which Adidas had never reacted. ICN stated that this report contained enough evidence to strongly suspect that Adidas footballs were produced by workers at lower than minimum wages and without access to trade unions or adequate health and safety standards. In addi-

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tion, child labour could be involved. ICN therefore asked the Dutch National Contact Point for the Guidelines to contact Adidas on this issue and to study whether Adidas’s behaviour was in accordance with the Guidelines. The National Contact Point first invited both parties individually to clarify their points of view and subsequently organised a tripartite meeting for an open dialogue. This meeting showed that ICN and Adidas agreed on the following: • Standards to pursue (both ICN and Adidas generally focus on the same internationally recognised labour standards), with some points of discussion remaining, for example on “living wages”; • The need for continuing transparency by Adidas on how it implements these standards; • The need for continuing external monitoring, disclosure and verification; • The need for strengthening communication between stakeholders, as Adidas individually but also within the framework of FIFA, and the World Federation of the Sporting Goods Industry; • The need for ICN to continue taking into account independent, reliable and substantial information provided by the sports industry and other parties. Even though the issues that were brought to NCP’s attention by ICN possibly still exist in the Indian sports goods industry at large, the NCP concluded on the basis of the information provided by Adidas that Adidas encourages its suppliers to operate in a socially responsible manner. It does this through its corporate code of conduct, which covers the issues mentioned by ICN. No evidence has been found of child labour used for the production of Adidas footballs. The implementation of Adidas’s corporate code of conduct is monitored in the following ways: 1. The external monitoring agency SGS monitors on child labour and several health and safety measures; 2. Adidas monitors its suppliers internally on compliance with its SOE.

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The Fair Labour Association (FLA) as an external auditor checks Adidas’s internal monitoring system. It is noted that with respect to Adidas’s supplier in India, there has not yet been external monitoring, verification and disclosure by FLA that corroborates Adidas’ own monitoring. This is however envisaged in the future. The two parties agreed that communication in the future should be improved, as an important finding during the NCP procedure was this has been lacking in the past. According to ICN, an important contribution to improved communication will be the disclosure of future reporting by FLA on the implementation of the SOE at country and product level. It was noted that if two-way communication would improve, the discussion between Industry and NGO’s could

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reach a higher level of information exchange. Both parties therefore welcomed the opportunity that the NCP had given for a constructive discussion. The relevant document on the procedure relating to Adidas and ICN can be found on the website of the Dutch NCP: www.oesorichtlijnen.nl

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Document 4

Statement from the Swedish National Contact Point for OECD Guidelines for Multinational Enterprises with Reference to Specific Instances Received Concerning Atlas Copco and Sandvik June 2003

On 17 February 2003, the Swedish National Contact Point for OECD Guidelines for multinational enterprises (NCP) received two specific instances from Attac Sweden/Friends of the Earth Sweden concerning the operations of Sandvik and Atlas Copco in Ghana. The organisations were of the opinion that the Swedish enterprises through business relations and active cooperation chiefly with the two mining companies Ashanti Goldfields and Ghana Australian Goldfields, had not complied, inter alia, with the sections of the OECD Guidelines relating to human rights and environmental considerations in the areas where the mining companies operate. Conclusion In the light of the information the NCP has had access to and collected, it is the NCP’s view that Atlas Copco and Sandvik have not failed to comply with the OECD Guidelines in respect of human rights and environmental considerations. At the same time, the NCP encourages Sandvik and Atlas Copco to remedy the lack of knowledge of the contents of the Guidelines at subsidiaries and among personnel on the spot in Ghana. Based on this and in view of the processes that have been initiated, the NCP draws the conclusion that no further processing of these cases is required. Consideration of the matter and reasons for the conclusion NCP’s main task is to spread information about and promote the use of the OECD Guidelines for Multinational Enterprises. Furthermore, it is NCP’s duty to assist in solving problems that arise through discussion and dialogue with the parties concerned.

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All Swedish enterprises should take responsibility for the effects of their activities no matter where in the world they operate. In developing countries, enterprises face special problems and challenges. NCP has examined the specific instances in accordance with the procedural guidance for handling individual cases in countries that are not members of the OECD. Since the material submitted by the organisations reporting the matter was incomplete, NCP has collected information on the issues raised. NCP has studied the information from the enterprises concerned, the Swedish Metalworkers’ Union and the Embassy of Sweden in Nigeria. In addition, NCP has acquainted itself with additional information from, inter alia, a Ghanaian NGO, the Wassa Association of Communities Affected by Mining. NCP has held five extra meetings with reference to the specific instances. In addition, separate meetings have been held with the organisations that submitted the specific instances and the enterprises concerned, as well as a joint information meeting with all parties. The two enterprises and the Swedish Metalworkers’ Union travelled to the area to investigate the situation. During the time NCP has been engaged in the matter, several processes have been initiated, inter alia a dialogue between WACAM and the local mining companies. The material reveals the environmental and social problems that exist in connection with mining in Ghana but also the existence of established processes in the form of a regulatory framework and judicial institutions to tackle these problems. However, these processes and institutions wrestle with the difficulties normally associated with developing countries such as, for example, insufficient resources and capacity. NCP assesses that the roles of Atlas Copco and Sandvik in the individual cases is limited. In the light of the information the NCP has had access to and collected, it is the NCP’s view that Atlas Copco and Sandvik have not failed to comply with the OECD Guidelines in respect of human rights and environmental considerations. A question that has emerged in connection with these cases is how far the responsibility of multinational enterprises extends in relation to business partners and the host country’s government. This matter is discussed in Section 2:10 of the OECD Guidelines, which says that enterprises should “Encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the Guidelines”. An interpretation of how far responsibility extends under section 2:10 must be made from case to case and be based on the multinational enterprise’s possibilities of influencing a business partner or a specific situation.

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The information that has emerged indicates that Sandvik’s and Atlas Copco’s personnel on the spot did not have adequate knowledge of the contents of the OECD Guidelines. The NCP therefore encourages these enterprises to enhance knowledge of the Guidelines both internally and externally.

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Lastly, the NCP establishes that the specific instances received and subsequent processing were important for the promotion of the Guidelines. A number of processes have been initiated, the results of which will hopefully be positive for social and environmental developments in the mining industry in Ghana and for Swedish enterprises’ increased awareness of these issues. Members of the following organisations are included in the Swedish National Contact Point: • Government Offices (Chairperson for NCP, Sofia Calltorp, Ministry for Foreign Affairs). • Swedish Trade Union Confederation, Swedish Metalworkers’ Union, Swedish Union of Clerical and Technical Employees in Industry, Confederation of Professional Employees, Swedish Confederation of Professional Associations (SACO), Confederation of Swedish Enterprise, Swedish Federation of Trade.

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Document 5

Exchange of Letters on Democratic Republic of Congo Letter from the OECD Secretary General to the UN Secretary General Mr. Donald Johnston Secretary-General OECD 2 rue André-Pascal 75775 Paris Cedex 16 DJJ/2003.17.pn

4 February 2003

Dear Secretary-General, At its session last December, the OECD Committee on International Investment and Multinational Enterprises, which has oversight responsibility for the OECD Guidelines for Multinational Enterprises, took note of the Expert Panel’s Report on the illegal exploitation of natural resources in the Democratic Republic of Congo. I am conveying to you the views of the Committee as expressed in the attached letter by its Chair, for your attention and that of the Security Council. This letter was written before the adoption on 24 January of Resolution 1457 by the Security Council. The resolution requests the expert panel to provide information to the Committee and to the National Contact Points for the OECD Guidelines, which is also suggested in the Committee Chair’s letter. I would appreciate it if you could identify a contact point in the United Nations with whom the Chair of the Committee can get in touch in order to pursue co-operation on this matter. Yours sincerely, Donald J. Johnston Mr. Kofi Annan Secretary-General United Nations UN Headquarters First Avenue at 46th Street New York, NY 10017 Attachment: The OECD Guidelines for Multinational Enterprises

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Letter from the Chair of CIME to the OECD Secretary General

Mr. Marinus W. Sikkel Chair of the Committee on International Investment and Multinational Enterprises Head of Investment Policy and International Organisations Ministry of Economic Affairs P.O. Box 20101 2500 EC The Hague Netherlands Paris, 23 January 2003 Dear Secretary-General, In my capacity as Chair of the OECD Committee on International Investment and Multinational Enterprises, I am writing to ask you to convey the following views of the Committee to the Secretary-General of the United Nations for the attention of the Security Council. The Committee has taken note of the Panel of Experts’ Final Report on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of Congo [S/2002/1146], which refers prominently to the OECD Guidelines for Multinational Enterprises. The United Nations Security Council’s mandate to the Expert Panel is a concrete expression of its concern about the situation in that country. The Committee has the view that multinational enterprises operating in situations of violent conflict and widespread human rights abuses face distinctive challenges. It has had an opportunity to examine these questions in other contexts as part of its work relating to the OECD Guidelines. The Committee welcomes the opportunity to co-operate with the United Nations on the issues raised in the Panel’s report relating to the OECD Guidelines.

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The Committee appreciates the Panel’s recognition of the value of the Guidelines as an international standard. However, certain inaccuracies in relation to the interpretation of the Guidelines might have been avoided if the Committee had been consulted prior to the release of the Panel Report. Therefore the Committee would like to provide some clarification on the nature and status of the Guidelines. The Guidelines are government recommendations to multinational enterprises for responsible business conduct. Governments are committed to promoting the Guidelines and encouraging their observance by multinational enterprises operating in or from their territories. While observance of the Guidelines by enterprises is voluntary and not legally enforceable, each adhering government has undertaken to establish a National Contact Point that deals with all matters relating to the implementation of the Guidelines in the national context,

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including specific enquiries regarding the activities of individual enterprises. National Contact Points do this on the basis of procedural guidance designed to ensure the effectiveness of the Guidelines. In this process, governments work constructively with interested parties that may include enterprises, trade unions and non-governmental organisations as appropriate, in order to assist the parties in resolving the issues. (A copy of the Guidelines and related provisions is attached.) The Expert Panel’s report calls on governments adhering to the Guidelines to ensure that companies with operations in the DRC are aware of and committed to observing the recommendations set forth in the Guidelines. The adhering governments and the 37 National Contact Points take their role of furthering the effectiveness of the Guidelines very seriously. The report names companies located in adhering countries that the Panel concludes have not observed the Guidelines. The Committee is concerned about the proper use and application of the Guidelines. In order for the Committee and the National Contact Points to meet their responsibilities, it would be very helpful for them to have access to the information on which the Panel based its conclusions. The Committee stands ready to work with the appropriate United Nations contact on making this information available to the National Contact Points concerned and to explore how co-operation can best be pursued as the Security Council considers follow up to the Panel’s report. Yours sincerely,

Marinus Sikkel Chair of the OECD Committee on International Investment and Multinational Enterprises Mr. Donald Johnston Secretary-General OECD 2, rue André-Pascal 75775 Paris Cedex 16 cc. Delegates of the OECD Committee on International Investment and Multinational Enterprises Attachment: The OECD Guidelines for Multinational Enterprises

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Letter from the Chair of CIME to BIAC, TUAC and NGOs

Mr. Marinus W. Sikkel Chair of the Committee on International Investment and Multinational Enterprises Head of Investment Policy and International Organisations Ministry of Economic Affairs P.O. Box 20101 2500 EC The Hague Netherlands Paris, 29 January 2003 You have enquired about the course of action envisaged by the OECD Committee on International Investment and Multinational Enterprises (CIME) in relation to the issues raised in the Panel of Experts’ report to the United Nations Security Council on the illegal exploitation of natural resources in the Democratic Republic of Congo (DRC). The report calls on the governments adhering to the OECD Guidelines for Multinational Enterprises to ensure that companies with operations in the DRC are aware of and committed to observing the recommendations set forth in the Guidelines. The CIME takes this matter very seriously and discussed it at its December meeting. I am pleased to inform you that it has taken the following steps so far: • In my capacity as Chair of the CIME, I have been mandated to send a letter to the Security Council (see attachment). In that letter, the CIME welcomes the opportunity to co-operate with the United Nations on the Guidelines issues raised by the Panel’s report and asks for the information upon which the Panel based its conclusions regarding the role of OECD-based companies named in the report. The letter recalls the voluntary nature of the Guidelines and describes their implementation procedures. • The Committee agreed on the need for the National Contact Points to ensure appropriate communications among themselves as follow up is undertaken at the national level. • The OECD Secretariat is preparing a note on questions of principles and interpretation related to the use of the Guidelines by other organisations.

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• The Committee may address the generic issue of helping multinational enterprises to observe the Guidelines recommendations in situations of violent conflict and widespread human rights abuses at a later stage, taking advantage of its earlier work in this area (see the 2002 Annual Report on the OECD Guidelines for Multinational Enterprises, Part I. Annex VII [www.oecd.org/daf/ investment/guidelines]).

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I thank you for your interest in the OECD Guidelines for Multinational Enterprises and hope that this letter answers your questions. Yours sincerely,

Marinus Sikkel Chair of the OECD Committee on International Investment and Multinational Enterprises

cc. Delegates of the OECD Committee on International Investment and Multinational Enterprises Enclosure: letter to the UN Security Council

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Document 6

Exchange of Letters on Co-operation between Global Reporting Initiative and OECD Secretary General Letter from Global Reporting Initiative to OECD Secretary General

Keizersgracht 209 P.O. Box 10039 1001 EA Amsterdam The Netherlands www.globalreporting.org Tel: +31 (0) 20 531 0000 Fax: +31 (0) 20 531 0031 H.E. Mr Donald J. Johnson OECD Secretary-General Organisation for Economic Co-operation and Development 2, rue André-Pascal 75775 Paris Cedex 16 France 21 February 2003 Your Excellency, I am writing to express the interest of the Global Reporting Initiative (GRI) in exploring with OECD member countries how greater synergy might be achieved between the work of the OECD and the GRI, and in particular how the GRI might most effectively complement the OECD Guidelines for Multinational Enterprises (MNEs). At the UN World Summit on Sustainable Development (WSSD) last September, your Government with others made a clear commitment in the Plan of Implementation to enhance corporate environmental and social responsibility and accountability. In this context, the GRI was deeply appreciative of the WSSD’s specific recognition of the GRI Sustainability Reporting Guidelines as a practical instrument to help business improve its social and environmental performance.

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We also welcomed other positive official references by the G7, OECD and EU over the last year. As the world’s only multi-stakeholder sustainability reporting organisation, we would like to assure you of our commitment to work with governments, business and other stakeholders to achieve the important sustainable development goals set out at Johannesburg. To this end, and with a view to optimising communication on our shared action agenda, we would specifically like to propose that some form of regular consultation be instigated between OECD governments and the GRI. Like many of those present in Johannesburg, the GRI welcomed the WSSD’s identification of two key elements of a successful response strategy to the challenge of sustainable development. The first of these was the Summit’s recognition of the crucial importance of effectively engaging the business community in the collective effort to advance sustainable behaviour. The second element was the emphasis that the Summit gave to the benefits of promoting solutions-oriented partnerships between the various stakeholder groups to complement government policies and measures. The GRI has been delighted that the business community itself has responded positively to the GRI’s potential in this context. This is reflected in the fact a growing number of leading corporations (including BASF, BHP Billiton, Canon, General Motors and Royal Dutch/Shell) have become GRI reporters, and in the recognition accorded in such reports as the recent World Business Council on Sustainable Development (WBCSD) publication “Sustainable Development Reporting : Striking the Balance”. Together with NGO supporters such as Amnesty International, Consumers International, Transparency International and WWF International, as well as leading accounting and labour groups, the GRI provides a unique voluntary framework for advancing these two elements of the WSSD agenda. At the level of financial markets, we believe that there is also a strong business case for GRI reporting. In the post-Enron period, there is evidence to suggest that progressively greater attention will be given to the ways in which sustainability reporting can improve corporate governance through improved transparency, closer attention to the definition of non-financial risks, and the identification of new business opportunities. According to several leading accounting firms, such non-financial reporting has the additional benefits of reducing stock price volatility and the cost of capital.

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A “Collaborating Centre’ of the UN Environment Programme (UNEP), the GRI enjoys high-level support from individual governments, the EU Commission, the World Bank group and the UN Global Compact. As an independent, not-for-profit multi-stakeholder organisation, however, there is no constitutional provision for coordinated government contact or input. While the GRI is yet to determine where

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it might seek observer status at the intergovernmental organisation level, we are conscious that we share with governments a common agenda and concern to advance voluntary sustainability reporting. Against this background, and in the light of the OECD MNE Guidelines, which the GRI’s own Guidelines neatly complement, we believe there would be merit in using the OECD as a forum for holding consultations between governments and the GRI on sustainability reporting. This would build on a productive relationship of past contacts with your Secretariat, including GRI presentations to various OECD bodies, including the last two OECD Forums. Such consultations, which could be informal in nature and held at a rhythm to be agreed, might prove an efficient means of enabling governments to track the progress of the GRI and sustainability reporting, to identify and assess emerging policy issues, and to share thinking about future activities. The OECD’s expertise in these areas, and the local presence of representation by the business and labour constituencies, make it a potentially attractive option. With a view to opening a discussion on this matter, we would be grateful if you could advise Paul Hohnen, GRI Director for Strategic Development ([email protected]) the name of your contact point for future correspondence and suggest how you would wish to take the exchange forward. To facilitate coordination, we are also copying this letter to OECD permanent representatives. Yours sincerely, Ernst Ligteringen, Chief Executive Global Reporting Initiative

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Letter from OECD Secretary General to Global Reporting Initiative Mr. Donald Johnston Secretary-General OECD 2, rue André-Pascal 75775 Paris Cedex 16 DJJ/2003.62.pn

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29 April 2003 Dear Dr. Henderson, I am writing in response to Mr. Ligteringen’s letter of 25 February proposing co-operation between the Global Reporting Initiative and the adhering governments to the OECD Guidelines for Multinational Enterprises. As you know, OECD governments are committed to actively promote the Guidelines. Work in this area represents a distinctive contribution of the Organisation to the follow-up to the World Summit on Sustainable Development in Johannesburg. The OECD shares the GRI’s view that it is important to maximise synergies and develop partnership between the OECD Guidelines and other international instruments and, in light of its mandate, the value of its work and its international recognition, I agree that the Global Reporting Initiative should be such a partner. In this regard, I was pleased that at the Roundtable I convened on 4 April, your representative, Paul Hohnen, viewed the Guidelines as the foremost multilaterally-endorsed benchmark for corporate responsibility. I would encourage the GRI to strengthen its efforts to publicise the Guidelines while, for our part, we would reciprocate through efforts to increase the visibility of the GRI reporting standards. The last two OECD Roundtables organised in conjunction with the Annual Meetings of the National Contacts Points for the Guidelines have already offered occasions for a dialogue with Global Reporting Initiative representatives. I am pleased that the coming Annual Meeting and Roundtable to be held on 23-25 June 2003 will provide an opportunity to renew the experience and to explore how co-operation can be best pursued and deepened in the future. I suggest that Global Reporting Initiative contact Pierre Poret, the head of the Division servicing the work on the OECD Guidelines [tel.: 33 1 45 24 88 56; [email protected]], in order to discuss the practical modalities of a meeting between Global Reporting Initiative representatives and the Guidelines institutions in June. Yours sincerely, Donald J. Johnston Dr. Judy Henderson GRI Board of Directors Keizersgracht 209 1001 EA Amsterdam The Netherlands

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Background – The Role of the National Contact Points in the Implementation of the OECD Guidelines for Multinational Enterprises The institutions that promote and implement the Guidelines are set forth in the OECD Council Decision, a binding declaration subscribed to by all adhering countries. The Council Decision requires each adhering government to set up a National Contact Point. These play a key role of any Guidelines institution in establishing the Guidelines as an effective and vital tool for international business (see Diagram below). The National Contact is responsible for promoting the Guidelines in its national context and contributing to a better understanding of the Guidelines among the national business community and other interested parties. The National Contact Point: • Responds to enquiries about the Guidelines; • Assists interested parties in resolving issues that arise with respect to the application of the Guidelines in “individual instances” through the availability of its “good offices” and, if the parties agree, facilitating access to other consensual and non-adversarial means of resolving the issues between the parties. (Comment: more in keeping with the procedural guidance); • Gathers information on national experiences with the Guidelines and reports annually to the CIME. Because of its central role, the National Contact Point’s effectiveness is a crucial factor in determining how influential the Guidelines are in each national context. While it is recognised that governments should be accorded flexibility in the way they organise National Contact Points, it is nevertheless expected that all National Contact Points should function in a visible, accessible, transparent and accountable manner. These four criteria should guide National Contact Points in carrying out their activities. The June 2000 review enhanced the accountability of National Contact Points by calling for annual reports of their activity, which are to serve as a basis for exchanges of view on the functioning of the National Contact Points among the adhering governments. The current publication summarises the reports by the individual National Contact Points and provides an overview of the discussions during the second annual meeting of the National Contact Points held in June 2002.

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Figure 1.

Institutions involved in implementing the Guidelines

National level

OECD level Multinational Enterprises and National Business Federations

National Contact Points

BIAC Business and Industry Advisory Committee

ADHERING COUNTRIES

Trade Unions and other Employee Associations

CIME

TUAC Trade Union Advisory Committee

NGOs

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Consultations – Contributions by Business, Trade Unions and Non-governmental Organisations

Note by the Secretariat: The following texts are published in their original form. The views expressed are those of the authors, and do not necessarily reflect those of the Organisation or of its member countries.

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BIAC Statement BIAC continues to support the effective implementation of the Guidelines and wants to take the opportunity to congratulate National Contact Points (NCP) for their work in the last year. The NCPs have proven to be effective partners to promote the Guidelines and to correctly lead implementation of specific cases. BIAC is always open for discussion of all aspects of the Guidelines and will continue to promote the Guidelines amongst its business members. At the same time BIAC wants to draw the attention of the NCP Annual Meeting to the following concerns which made the application and promotion of the Guidelines with business unnecessarily burdensome during the reported period: 1.

Scope of application

One important point concerns efforts of some NCP to broaden the scope of the Guidelines by including commercial transactions. This would be in contradiction to the context in which the Guidelines were negotiated and still have to be seen: The Guidelines go together with, and are the inseparable twin of, the commitment of governments to the liberalisation and protection of foreign direct investment. We therefore welcome the emerging consensus amongst CIME members that any attempt to broaden the scope of the Guidelines to include commercial transactions in general would be regarded as clearly against the intent of the Guidelines. BIAC welcomes that CIME underlined that any transaction covered must include an “investment nexus”, i.e. an operation equivalent to investment. From a business perspective, this may involve two aspects: • The first is that pure trade cases are clearly outside the scope of the Guidelines. The Guidelines are an instrument dealing with investment related questions. We continue to ask the NCP meeting/CIME to issue a clear and reliable statement with this content. • The second aspect covers cases where a commercial transaction is equivalent to investment. This is the case where an investor has an explicit and

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direct long-term control on all parties involved in a commercial transaction. This “investment nexus” is a prerequisite to regard specific commercial relationship trade cases as falling under the scope of the Guidelines, depending on the nature of individual cases. 2.

Democratic Republic of Congo – Panel of Experts’ report to the UN Security Council

BIAC followed closely the treatment of companies in the report of the “Panel of Experts” to the UN Security Council where the MNE Guidelines were mentioned. BIAC urged CIME to take action and CIME decided to issue a press release at the meeting with the UN Panel. The meeting followed adoption by the United Nations Security Council in January of Resolution 1457, which requested the Panel to provide information to the CIME and NCPs in charge of the OECD Guidelines in the countries in which the enterprises listed in the report are based. CIME found agreement with the UN Panel which will give the information on companies listed in the report to CIME and the NCPs affected. BIAC fully supports initiatives of the international community to stop the horrifying development in the Democratic Republic of Congo. The use of the Guidelines in such context is ambitious and very complex. Therefore, we maintain our position that the NCPs and CIME should continue to clearly reject the use of the Guidelines through the UN “Panel of Experts” which includes the naming of companies allegedly misbehaving. This use of the Guidelines infringes the implementation in ’specific instances’ as defined in the Procedural Guidance of the Guidelines. The NCPs are the only competent authorities to perform the procedures defined in this Guidance. The correct application of the Procedural Guidance is one of the basic pillars not only to maintain business support for the effective implementation of the Guidelines. 3.

Confidentiality

BIAC asks again all participants of the Guidelines procedures to strictly observe confidentiality in their activities. The confidentiality requirement is clearly spelled out in I.C.4.a) of the ’Procedural Guidance’ and para. 19 of the ‘Commentary’ which are demanding “confidentiality of the proceedings” to be maintained for specific instances. We noticed several occasions of infringements of this principle through some interested parties. This is related to the fact that some of the specific instances raised have been brought in connection with already existing or newly launched public campaigns of some parties.

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BIAC would regret if the Guidelines evolves into a campaigning instrument for the benefit of some parties. It is BIAC’s intention to safeguard the Guidelines’ function as an instrument to facilitate the development of concrete solutions to

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BIAC Statement

specific questions in good faith among all interested parties. Therefore, BIAC strongly asks NCPs and CIME to apply appropriate measures where the breach of confidentiality of the proceedings happened. 4.

EPOC/CIME initiative on the environment chapter of the Guidelines

BIAC agreed upon the idea of further exploring the environment chapter of the Guidelines, for the 2004 NCP Roundtable as well as for background material and studies in the preparation of this event. The project will contain a proposal for an operational booklet on the environmental components of the Guidelines and a back-to-back event with the Global Forum on International Investment planned in South Africa, late 2003. BIAC ask the NCP meeting to ensure that both initiatives remain largely “promotional” and will not undermine the consensus on which the Guidelines are based in that they will lead to de facto prescriptive standards. 5.

Procedural issues (comments on DAFFE/IME/NCP(2003)1, Annex 3)

a)

Individual NCP written procedures or guidance (0.7-0.8)

BIAC acknowledges the need that some NCPs develop individual written procedures or guidance. However, this can by no means imply any derogation from the standards included in the Procedural Guidance to the Guidelines. b)

Measures to promote timeliness and efficiency (0.14-0.16)

Overall, business has always an interest in the timeliness and efficiency of administrative procedures. However, given the sensitivity of many “specific instances” and the specific nature of the NCP procedures a careful balance has to be found between timeliness of the procedures on the one hand and thoroughness of the investigation on the other. BIAC has no interest in introducing strict time limits into the Procedural Guidance. We would prefer to see each specific instances dealt with on its own merits. Often the information provided by interested parties launching the instance is insufficient. In such cases in order to come to a balanced conclusion there need to be time available for further investigation of the facts. Thereby, thoroughness, confidentiality and fairness can be more important elements of a Guidelines procedure than timeliness. In any case, many NCPs are bound by their national administrative procedural rules which usually include provisions on timeliness of administrative procedures. c)

Responsibility for information provision (0.17-0.19)

BIAC agrees with the majority of NCPs that the primary responsibility for information provision rests with the individuals or organisation that raised the specific

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instance and the companies concerned. There are no grounds in the Guidelines or in the Procedural Guidance which oblige NCPs to “ex officio” investigations. It is left to the interested party launching a specific instance to proof its assertions and to provide the NCP with all the facts necessary to proof the applicability of the Guidelines to a “specific instance”. d)

The role of host country legal, regulatory or administrative procedures (0.20-0.22)

BIAC feels at unease with the finding that “it appears to be quite common that NCPs consider specific instances that are covered by host country law and procedures” (0.20). Para. 2 of the Commentary states clearly that “The Guidelines are not a substitute for nor should they be considered to override local law and regulation”. Deriving from that we feel that NCPs can not override national law nor override or interfere with national precedence. Thus, we strongly support the view of one “experienced” NCP which was confronted with a specific instance that concerned business conduct that was also the subject of legal proceedings and decided that it could not proceed in dealing with the specific instance. Also CIME should encourage interested parties launching a specific instance “to address their issues with the MNE directly and with the appropriate regulatory/legal authorities prior to lodging a complaint with the NCP” (0.22). e)

Public statements while a case is being considered (0.27)

The carefully balanced agreement found during the revision of the Guidelines between transparency and confidentiality has been communicated by BIAC to all our members: after procedures have been started, strict confidentiality applies. In our reading, that refers to the NCP as well as to the interested parties. To this regard, BIAC can only reiterate the point made by the majority of NCPs, that no information at all should be released during the consideration of a specific instance. There is in fact “an inverse relationship between publicity and the resolution of specific instances”. Also at the end of the proceedings a careful balance has to be found by each NCP between the need to protect sensitive company information and transparency. Competition considerations need to be taken into account and much should depend on the explicit consent of the company involved. In many jurisdictions, this will be required already by data protection laws. High data protection standards are crucial for sustaining companies’ support for the procedures. To this respect, when publishing the outcome of specific instances, names of companies should not be mentioned as long as the companies do not consent (0.34).

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TUAC Working Paper on the OECD Guidelines for Multinational Enterprises Review of NCPs Since the beginning of 2001 TUAC is running a special project on the implementation of the OECD Guidelines for Multinational Enterprises. The project has principally focused on raising awareness of the Guidelines in adhering and nonadhering countries, getting National Contact Points (NCPs) to function properly, helping affiliates and other trade union organisations to raise and process cases and promoting linkages to other policy areas. In order to evaluate the performance of NCPs, TUAC has carried out a survey of the functioning of NCPs among TUAC affiliates and other trade union organisations. This paper is based on replies and comments made by trade union organisations in Belgium, Brazil, Canada, Chile, the Czech Republic, France, Germany, Ireland, New Zealand, Sweden, Switzerland, the UK and the US. The reply frequency was lower then the two previous years. One reason for this is that trade unions do not feel that they have a lot to report on. Both the replies and contacts with affiliates indicate that, apart from some exceptions, there have not been many changes in NCP structures or increase in NCP activities since spring 2002. On the contrary, there is a tendency to cement already existing structures. Passive NCPs remain passive, while active NCPs have stayed active. Promotion Since the review of the Guidelines trade unions, NGOs, businesses, NCPs and others have all contributed to raise the visibility of the Guidelines. The OECD Secretariat claims that the Guidelines have become “one of the world’s foremost corporate responsibility instruments”. However, it is of utmost importance that NCPs do not relax their efforts to promote the Guidelines. They are still unknown in countries outside the OECD area, where they can make the biggest contributions. They are also little known in some of the countries that have adopted them such as Argentina and Mexico. The Brazilian trade union confederation CUT organised a seminar on the Guidelines in May 2003, but they found it difficult to engage business in a discussion on the Guidelines. They suggest that the Brazilian NCP should

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organise seminars and provide information about what the government expects from the multinational enterprises. The initiatives taken by the governments in the Czech Republic and New Zealand are very welcome, while governments in Argentina, Canada, Mexico and Switzerland among others have yet to start some serious work on the promotion of the Guidelines. A good example of how the parties can work together to promote the Guidelines is the seminar organised in the Czech Republic in December 2002 by the employers’ association together with the trade union confederation and the NCP. TUAC has participated in and co-organised a number of seminars in adhering and non-adhering countries to raise awareness of the Guidelines and disseminate the Users’ Guide. The last such event was organised by the Malaysian Trades Union Congress and APRO, which is the regional organisation of the International Confederation of Free Trade Unions in Asia, in the beginning of June 2003. Another seminar was organised jointly with TUAC and Caisse des Dépôts in France on the Guidelines at the Johannesburg World Summit on Sustainable Development. This year TUAC and the FES are running a joint programme on the Guidelines with the support of the European Commission (DG Trade). The purpose of the programme is to raise awareness of the Guidelines through a succession of four workshops covering Central America, Northern and Southern Africa and Asia. These are primarily aimed at trade unionists, but representatives of governments, business organisations and NGOs are also invited in order to strengthen the dialogue between these groups. Furthermore, the workshops encourage non-adhering governments to adopt the Guidelines and to establish NCPs on their own initiative. The first workshop was held in Mexico City on 31 March-1 April. Among the 60-70 participants were trade unions and NGOs from Mexico, Guatemala and Costa Rica, the Minister of Labour of Costa Rica and a representative of the Ministry of Economics in Guatemala. However, both the Mexican NCP and the business representatives declined the invitation. The second workshop was held in Casablanca on 5-6 May. Representatives of trade unions, business organisations, NGOs and governments from Morocco, Algeria, Tunis and Egypt had been invited. The French NCP also took part in the workshop and shared with the audience its experiences with cases. While trade unions and NGOs have shown a significant interest in these issues, it has been quite difficult to engage some governments and business organisations. The OECD Secretariat has also been reluctant to participate. The two last workshops will be held in the second part of the year, one is provisionally scheduled in Zambia on 6-7 October and one in Southeast Asia in the end of October. Implementation 94

Trade unions have raised more than 30 cases with NCPs since the review of the Guidelines (a summary of the cases is attached). Most of the cases concern the

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TUAC Working Paper on the OECD Guidelines for Multinational Enterprises

non-respect of trade union rights, particularly freedom of association, and closures or transfers of companies/entities or parts of companies. About half of the cases refer to corporate conduct in non-adhering countries. The responses from NCPs to the cases raised are far from satisfactory. A majority of the cases remain unresolved. Only a few of the cases have been successfully resolved or led to recommendations to companies. Five of the cases have been withdrawn or resolved in other ways than through the efforts of the responsible NCP. One interesting development, though, is that several trade unions have used the Guidelines to negotiate solutions with companies. To avoid having cases being brought to NCPs some companies have preferred to enter into dialogue with trade unions. TUAC has identified a number of obstacles to the effective treatment of cases. Firstly, there is a lack of transparency throughout the procedures, from the submission of the case to its closure. Some NCPs do not communicate at all with the party raising the case and in some cases several moths have passed until the party receives a reply. Some NCPs, such as that of Japan, do acknowledge receipt of the cases, which is important. But the party raising the case should also be kept informed of the measures taken by the NCP to investigate and resolve the case. Moreover, they must be informed of the outcome. Two cases were raised such a long time ago that it can be assumed that the NCPs consider them closed, but the trade unions have not been notified. These two examples concern the US and Polish NCPs. In May 2001, the US trade union confederation AFL-CIO wrote to the US NCP and requested a meeting to discuss the Guidelines’ application in Burma. It never got a reply. In spring 2002, the Polish trade union confederation Solidarnosc contacted the Polish NCP about the conduct of the US-owned Warsaw Marriott Hotel. It too did not get a reply. Secondly, several NCPs do not follow the procedural guidance. When an NCP has decided that a case merits further examination it is supposed to “offer a forum for discussion” and “offer good offices to help the parties involved to resolve the issue”. Yet some NCPs do not respond to the trade union raising the case, nor do they use its good offices to set up tripartite meetings between the trade union and the company. Furthermore, NCPs should “deal with the issues raised in an efficient and timely manner”. Some of the ongoing cases were raised more than a year ago: IHC Caland was raised with the Dutch NCP in July 2001, Choi and Shin with the Korean NCP in February 2002, Maersk Medical Inc. with the Danish NCP in February 2002, and Aspocomp with the French NCP in April 2002. There may be various reasons why some cases take longer than others, but the fact is that few cases are resolved within a year of their submission. Trade unions, NGOs and others raising cases are entitled to a more ambitious handling of the NCPs. TUAC therefore welcomes the

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initiatives taken by some NCPs, for instance the UK NCP, to impose a time limit for the handling of cases. NCPs are also supposed to “make publicly available the result of these procedures unless preserving confidentiality would be in the best interests of effective implementation of the Guidelines”. Again, some NCPs appear to ignore the expectations to make results public. They do not even explain to the party raising the case why it would be in the best interest of the Guidelines to keep the result confidential. Not one of the outcomes in all the cases raised with the US NCP has been reported upon publicly. Thirdly, some NCPs appear to be using the fact that Guidelines cases are being treated in legal jurisdictions to avoid dealing with them: the Choi and Shin case in the Korean NCP and the Maersk case in the Danish NCP. They have both been reluctant to take action as the cases are also pending in courts in Guatemala respectively Malaysia. Yet the Guidelines are supplementary to national law and not legally binding. Therefore NCPs should not await juridicial procedures in order to resolve an issue or determine whether a company has violated the Guidelines. Moreover, the rule of law cannot be guaranteed in some countries and the legal procedures may therefore be of little relevance. This is the case with the specific issue on Choi and Shin which has been raised with the Korean NCP. The ILO Committee on Freedom of Association has urged the government in Guatemala to “ensure that the investigation covers all the allegations made in this case concerning serious acts of violence and other anti-union acts at the ChoiShin and Cimatextiles enterprises in the Villanueva free zone, with a view to clarifying the facts, determining responsibility and punishing those responsible”. Conclusions Despite the fact that three years have passed since the review of the Guidelines was concluded, several NCPs are still not fully operating. In order to change this, NCPs must be held accountable. At present there is no peer pressure within the CIME. The committee must start monitoring the performance of the NCPs. The current OECD annual NCP report merely provides the reader with a sample of what NCPs are doing. It should instead be turned into an analysis of the functioning of NCPs. It should evaluate their performance, identify problems and weaknesses and make recommendations, so as to improve their performance.

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NCPs have to take measures to reach speedier resolutions to the cases raised. TUAC do realise that some cases are more complicated than others and all factors are not within the control of the NCPs, but so far NCPs have had the main responsibility for the slow procedures. It is not unusual that trade unions have had to wait for months for a first reply from the NCP. If NCPs refuse to deal with cases in an efficient and timely manner, the CIME must interfere and give advice on what

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should be considered a reasonable amount of time for managing a case. The CIME should also set a time frame for the different parts of the procedures, from acknowledgement of receipt of a case to the first meeting with the parties concerned to the public report of the case. Such a time frame would of course have to be flexible, but it would be helpful as a way to give guidance to NCPs as well as to the public on what they could expect from NCPs. It would avoid creating unrealistic expectations on NCPs and it would also put pressure on the parties to reach a solution to an issue. In order to increase transparency and learn from the cases that have been raised, the OECD Secretariat has an important role in keeping track of the cases. At the moment there is no overview of all the cases that have been raised since the review of the Guidelines. The more the Guidelines will become known the more people will want to learn about the procedures and the outcomes of cases. The OECD Secretariat should set up a register of cases, which should contain information about all the cases raised. NCPs should be obliged to report to the OECD on their cases in a more detailed way than is currently the case in their annual reports. In the trade union statement* to the Evian G8 Economic Summit and OECD Ministerial Council, trade unions called on the OECD to put in place a programme to improve the effectiveness of the Guidelines so as to:• ensure that all NCPs are operating and meet the standards of the best performers; • set targets on efforts to promote the Guidelines; • raise awareness of the Guidelines, both in the OECD – so that the Guidelines are included in relevant meetings and activities – and also in other relevant intergovernmental fora; • establish an outreach programme with non-members on the Guidelines including regional meetings/seminars to raise awareness of the Guidelines; • review the experience with particular chapters of the Guidelines; and, • provide guidance on the time frame for dealing with cases.

* This statement has been prepared by the Trade Union Advisory Committee to the OECD (TUAC) in co-operation with our partner organisations, notably the International Confederation of Free Trade Unions (ICFTU), the World Confederation of Labour (WCL) and the European Trade Union Confederation (ETUC).

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OECD Watch Review of National Contact Points June 2002-June 2003 The Steering Committee of OECD Watch invited NGOs to submit reports on the functioning of their National Contact Points (NCPs) over the past year.1 This is the first time such an inventory of NCP activities has taken place from the NGO perspective. As time and resources are limited, OECD Watch has not been able to collect information about all NCPs. There are important gaps in the reports, which omit references to developments in countries in Central and Eastern Europe and Asia. There are different reasons for these omissions: there may be no NGOs associated with OECD Watch in these countries; the NGOs may not have had time to respond to OECD Watch’s questionnaire; or the NCPs may not be active. But as interest in the potential of the OECD Guidelines for Multinational Enterprises increases we anticipate a more comprehensive response in the future. Detailed reports were received about the work of the following NCPs: Argentina, Australia, Austria, Brazil, Chile, Germany, The Netherlands, Sweden, Switzerland, Mexico, United Kingdom and the United States. African NGOs also provided their views on the effectiveness of the Guidelines. The NGOs were asked to assess the activities of their NCPs against the core criteria set out in the Procedural Guidance of the Committee on International Investment and Multinational Enterprises (CIME) for the NCPs: visibility, accessibility, transparency and accountability. Problems with the Implementation Procedures are analysed; the promotional activities undertaken by NGOs over the past year are summarised. In an Annex there is a brief update prepared by SOMO on specific instances filed by NGOs. The review concludes with recommendations addressed to NCPs about how to improve their performance. The findings and recommendations of the NGO review will be presented to the Annual Meeting of NCPs in Paris on 23-24 June 2003. Visibility References in the final communiqués of the G8 Evian Summit (June 2003) and the G8 Finance Ministers Deauville Meeting (May 2003) help to increase the profile and the status of the OECD Guidelines for Multinational Enterprises. But what counts in making this an effective instrument are the resources governments are willing to put into building the capacity of the NCPs and the degree to which they promote the Guidelines across government departments and within the business community. In many countries there is a failure to integrate the NCPs into wider discussions about

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corporate accountability and there is confusion, reflected in the NCPs’ own reports, about the place of the Guidelines in the burgeoning area of international and national corporate responsibility initiatives. In Switzerland, for example, “it seems that some government departments are promoting the UN Global Compact, others the OECD Guidelines while others are intensively following the development in the UN Sub-Commission of Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights”. The Swedish Partnership for Global Responsibility (SPGR), which has the backing of the Swedish Prime Minister, offers a model for other governments. The SPGR, which brings together the UN Global Compact and the OECD Guidelines, encourages companies to support and implement both. The Guidelines cannot stand still and it will be necessary as the UN adopts new standards such as the Draft Norms on the Responsibilities of Transnational Corporations for these to be used by NCPs to interpret the relevant provisions possibly through their incorporation into the Commentary. Most NGO respondents stated that the location, identity and contact details of the NCPs were now readily available. In adhering countries in Latin America significant progress has been made in raising the profile of the NCPs. In Brazil, however, it was a trade union filing a complaint in May 2003 to the NCP, who had been nominally in charge of the Guidelines since 2000, which finally prompted the Minister of Finance to issue (some two weeks later) the decree formally establishing the post. But it is clear that even with longer established NCPs more could have been done over the past year to promote the Guidelines, up-date or improve the materials available on websites and engage in wider promotional activities with civil society, including organising seminars on issues of relevance to the Guidelines. Too many NCPs have adopted a passive stance. “The Swiss NCP is acting very timidly and doesn’t seem to have a strategy for promoting the Guidelines”. Although the Australian NCP stands out as one of the most effective in making a wide range of documents available “You would have to know about the Guidelines and the NCP website before you could find out about activities”. In the USA, one of the least visible NCPs, the only promotional activity noted is a link on the Department of State’s website that appeared in late 2002. But with more active NGO engagement things can improve. According to Fundación SES the Argentinean NCP has responded positively to suggestions about ways of jointly promoting the Guidelines among NGOs and the media. In Chile, Centro Ecoceanos associates the reluctance of the NCP to disseminate the Guidelines with a concern that it might lead to more cases being raised. Germanwatch too noted that the promotional literature produced by the German NCP gives little information on how to raise a case. The UK NCP, bucking the trend, began consultations in May on how to improve procedures.

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In most countries, outreach by NCPs to elected representatives has been lacking. This should be addressed in the coming year. “It is realistic to assume that most members of Congress know very little – if anything – of the Guidelines.” (FoE-US).

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Greater attempts to improve the outreach of the NCPs through the embassies in non-adhering countries should be a priority, particularly in Africa. The Zambian NGO, Citizens for a Better Environment (CBE), regretted the failure of the UK NCP to acknowledge in its Annual Report the engagement of NGOs from non-adhering countries. African NGOs are anxious to know what plans NCPs have to reach out to civil society and corporations operating in non-adhering countries to help ensure compliance with the Guidelines. Seminars could be organised by commercial attachés for local business, government, academics and NGOs. Embassies should be prepared to advise on how to file complaints and be instructed to forward any complaints to their NCPs. The NGO community is playing an active part in promoting the Guidelines and the Implementation Procedures. Since its formation OECD Watch has already made a positive contribution. The dedicated workshop on the Guidelines organised last March by IRENE, FoE-Nl and EED as well as presentations by OECD Watch members at different meetings including in the Democratic Republic of Congo and Thailand in March and June respectively has already led to demands for more information from NGOs around the world. Accessibility Performance has varied widely. Some NGOs reported that they were in regular contact by email and phone with their NCPs. In Australia, for example, at least twice a year the NCP holds community consultation sessions in three of Australia’s major cities, Sydney, Canberra and Melbourne. These sessions are open to all interested stakeholders and participants can contribute to the agenda. In countries like Austria and Germany an Advisory Committee or Working Party on the OECD Guidelines has been established with representatives of NGOs, trade unions and business. In The Netherlands the NCP holds quarterly meetings with social partners but there is no concrete structure, nor rules nor procedures. “It is totally unclear what the NCP does with NGO comments both in terms of the NCP’s own functioning and the official position that The Netherlands adopts at the CIME.” Few NCPs report back to NGOs after CIME meetings. NCPs often have a divide and rule policy and insist on meeting trade unions, business and NGOs separately. Generally NGOs feel that they have little influence over decisions taken by the NCPs who in the worst cases are a law unto themselves. But there can be benefits from a more formal structure: at the urging of the NGOs on the Chilean Advisory Committee, the NCP agreed to consult communities affected by Nutreco’s commercial salmon farming. Some NGOs report that despite their best efforts to engage their NCPs they have not been able to make much progress. This is true of the USA, where the NCP has done little more than acknowledge letters but has not invited NGOs for consultations on the problems raised.

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Transparency There has been little progress in most NCPs to improve the level of transparency with the Dutch NCP (who also Chairs the CIME) being a notable exception. “In The Netherlands there is a proper website, which includes statements of cases being finalised and the Annual Reports”. The Mexican NCP has never published any kind of public report on its activities and in April 2003 even failed to attend a seminar organised by the Friedrich Ebert Foundation and TUAC on the OECD Guidelines in Mexico. The NCP in Argentina is unable to participate in the CIME meetings because of budgetary constraints but nevertheless it is of concern that the post holder was not aware of the Annual Meeting of NCPs and seemingly only learnt about it through NGOs. In a surprisingly large number of countries, the NCP does not make its Annual Report available: in the USA the Annual Reports are not placed on the State Department’s website, nor is there any public notification on the website when a specific instance has been filed. The Mexican NCP has never published any kind of public report on its activities and does not maintain a website. In Argentina, last year’s Annual Report was “a mere formality” and more widely read in Paris than in the country. In most European countries (such as Germany and the Netherlands), and in Australia not only are the Annual Reports made public but also NGOs are normally invited to comment on the draft. But this is not the case in Sweden, where “NGOs have never seen drafts of the Annual Reports of the Swedish NCP, not even the final report that is sent to CIME”. In the United Kingdom, “Although the formalities of keeping Parliament informed have been observed, simply placing the Annual Reports and other documents in parliamentary libraries is of little use if MPs are unaware of their existence”. In only one of the countries surveyed, The Netherlands, is there any attempt to present the Annual Reports to parliaments or national legislatures for debate. But, of course, one of the main problems is the absence of detailed information in most NCP reports. Again there are exceptions, “the Dutch NCP is becoming more and more transparent in terms of the reporting about the cases raised by NGOs and trade unions”. Accountability Apart from issues to do with the formal accountability of NCPs to government, parliament and the general public, the main obstacle to accountability is the lack of adequate information provided by most NCPs, which might allow the way that they handle complaints to be monitored. Ultimately greater transparency in reporting will have to become the norm if the procedure is to inspire confidence. 102

Many NCPs treat complainants as if they had no rights once they have filed a case. Although simple queries are usually answered promptly, NCPs can keep

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NGOs and trade unions waiting for months for replies on cases that have been submitted. In one German case it took ten months to obtain an answer from the NCP. In Austria cases have been transferred from one NCP to another without prior discussion with the NGOs. Once the case has been transferred, the NGOs who presented the complaint can find themselves left out of the process entirely. The NCP who transfers such cases should remain involved in the process and take over responsibility for keeping the original complainants informed. The procedures have also been bedevilled by discontinuity. In 2002, when the officials responsible for the Guidelines were replaced in Mexico and in the United Kingdom, NGOs and other interested parties were not informed. The lack of continuity in handling complaints, compounded in Mexico, where all relevant information was mislaid, has resulted in excessive delays in concluding cases. There are concerns about the NCPs’ reluctance or lack of capacity to investigate specific instances. In Austria, the NCP has informed NGOs that all the information would have to be supplied by the complainants and the company, which seems like a recipe for a stalemate. Outside sources from independent experts, UN bodies, academics, journalists and the embassy staff should all be drawn on by the NCPs when assessing cases. A fact recognised by the more enlightened members of CIME. The Scope of the Guidelines and the Supply Chain The attempt by some NCPs to re-interpret unilaterally the Guidelines to exclude supply chain cases on the grounds that they lack an “investment nexus” has been the subject of much discussion among NGOs. Greenpeace in Germany had filed a complaint in April 2002 accusing a company that was processing oil from Russia of environmental damage. The German NGOs argue that there is a close relationship between the producer of oil and the company (TotalFinaElf) in Germany that owns the Leuna refinery: there is only one pipeline, the contract is for a lengthy period (20 years) and the refinery acquires about 70 per cent of its oil from this source. Nevertheless, the German NCP, although he has offered to facilitate meetings between the NGO and the company, refused to deal with the case within the framework of the Guidelines. On 8 April 2003 OECD Watch outlined NGO concerns in a letter to the CIME. In the Preface to the revised Guidelines there is an acknowledgement of “the farreaching structural change” that international business has experienced. The Preface continues, “Strategic alliances and closer relations with suppliers and contractors tend to blur the boundaries of the enterprise”.2 While NGOs recognise that there may at times be practical limitations to the ability of enterprises to influence the conduct of their business partners, they share Serena Lillywhite’s views that “There is no distinction in terms of applying the Guidelines and the concept of an investment nexus is confusing and not appropriate. The Guidelines are designed

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to have the widest possible coverage to promote corporate social responsibility in all aspects of global business. The key issue is one of transparency. Unless enterprises are open and transparent about the global dimensions of their business, including in which countries they invest, produce and source in, then it is extremely difficult to promote corporate social responsibility with the assistance of the Guidelines”. (Brotherhood of Saint Lawrence, Australia) The draft statement prepared by CIME on the scope of the Guidelines appears to endorse the broader interpretation of the supply chain issue. “Although the Guidelines have been developed in the specific context of international investment by multinational enterprises … when considering the application of the Guidelines flexibility is required.”3 The CIME recommends “a case-by-case approach” noting that the OECD Declaration does not provide precise definitions of international investment and multinational enterprises. The UN Panel of Experts Report on the Democratic Republic of Congo NGOs in many countries raised their concerns with NCPs about the findings of the UN Panel of Experts in October 2002 that the activities of over 50 OECD registered companies had breached the Guidelines and directly or indirectly helped prolong the civil war in the Congo. Although there has been considerable frustration over delays in getting responses from individual NCPs, dialogue with NGOs has improved. In the UK the NCP is now working closely with the Foreign Office Contact Point and the decision of the CIME to work jointly on the information that is to be sent to NCPs from the UN Panel is innovative. It is regrettable that communication between the Expert Panel and the NCPs is so slow. Congolese NGOs have called on OECD governments to ensure that their multinationals adhere to the Guidelines. In the USA a group of Congressmen have written to the NCP asking to be kept informed of investigations into the companies listed in the UN report. Members of Parliament in the UK who have spoken in debates about the situation in the DRC have expressed concern that the NCP has not kept them informed about actions taken. Only a few NCPs, notably the Swedish, initiated any inquiries in response to the UN Security Council Report. Procedural Issues

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The NGOs that responded to the questionnaire gave a number of important insights into the ways different NCPs handle complaints, specific instances. CIME has also recently conducted its own survey of NCP Procedures after noting differences in the NCPs’ approaches to their responsibilities. Responses to the questionnaire revealed a wide variation in the way NCPs balance the competing demands of confidentiality and transparency when dealing with complaints. NCP practices also differ as regards disclosure of information both before and after the conclusion of a case. There is said to be broad agreement among NCPs on a few key principles such as: the importance of timeliness in handling specific instances; the primary responsibility of the complainants to provide information; and the importance of transparency.

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But in practice as the NGO review makes clear NCPs diverge. The much-vaunted CIME principle of “functional equivalence” seems elusive even when it comes to the seemingly routine bureaucratic procedure of acknowledging receipt of a complaint. One NCP explained that policy on this was “under construction”. There is little agreement about the role of the Guidelines in relation to the existing legal, regulatory or administrative procedures of the host countries. The NCP responses show that it is quite common to use the specific instances procedure in parallel with legal, regulatory or administrative procedures. It would be important for CIME to consider to what extent this situation has occurred because of frustration on the part of the complainants about the NCPs’ inordinate delays, as in the Euskadi case in Mexico, in dealing with complaints. These delays undermine the potential benefit of the procedures as an alternative dispute mechanism. There is no consistent behaviour among the NCPs about informing parties of progress in handling cases; providing information to third parties; making public the fact that a case has been filed; issuing statements while a matter is still under consideration; making public the reasons for not proceeding with consideration of a case; and whether to name the parties in a specific instance. One does not have to search far for an explanation as to why there is little evidence of a predictable, consistent approach to handling cases; a minority of NCPs seem determined to block the procedures entirely and most NCPs are reluctant to exchange information on specific instances. NGOs welcome this attempt by CIME to standardize procedures and to identify training needs as long as it does not end in the lowest common denominator. Recommendations 1. NCPs should increase their outreach so that elected representatives and relevant parliamentary committees can develop a better understanding of their work. 2. Efforts to inform non-adhering countries about the Guidelines and the Implementation Procedures should continue. Particular attention should be paid to Africa. NCPs should devise ways of reaching out to African civil society organisations. 3. Embassies of adhering countries should be playing a stronger role in disseminating the Guidelines and advising NGOs and others who wish to bring complaints about the procedures. Embassies should monitor compliance of multinational enterprises in non-OECD countries with the Guidelines. 4. If an individual NCP is in doubt about the interpretation of the Guidelines in a specific instance, CIME should be able to clarify the issue at short notice – including at the request of the complainants – in order to resolve cases satisfactorily and in a timely manner.

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5. CIME should issue a clarification concerning the relevance of the Guidelines to situations of gross human rights violations and conflict. 6. NCPs should move towards greater transparency in their reporting to increase confidence in the procedures. NCPs should bear in mind the legitimate expectations of NGOs and trade unions when they file complaints: – They should be kept informed at regular intervals of progress with the case or reasons for delays. – They should be told if a meeting has taken place between the NCP and the other party. – Information on the case, assessments by experts or other government departments should be shared. – If a case is transferred to another NCP they should be informed and the original NCP should continue to monitor the case and keep the complainants informed. – Changes in the staffing of the NCP should not lead to disruption of procedures. 7. NCP reports should at least contain information about who are the originators of complaints; which sectors are involved and which provisions of the Guidelines have been invoked. 8. NCPs should adopt a target period of six months for concluding cases. 9. NCPs should draw on expert opinion in cases where reconciliation is not possible to ascertain the facts of particular cases, including foreign embassy officials, academics, and journalists. 10. NCPs should be pro-active and in exceptional cases – such as the allegations about the conduct of OECD companies in the Democratic Republic of Congo – take steps to investigate serious allegations whether or not a formal complaint has been filed. Patricia Feeney, with the assistance of Joris Oldenziel and Cornelia Heydenreich 20 June 2003

Members of the OECD Watch Steering Committee: Farhan Anwar, CBE, Pakistan [email protected]; Tricia Feeney, RAID, UK [email protected]; Paul de Clerck, Friends of the Earth, Netherlands [email protected]; Pieter van der Gaag, ANPED, Netherlands [email protected]; Cornelia Heydenreich, Germanwatch, Germany [email protected]; Patrick Mbewe, DECOP, Zambia [email protected]; Joris Oldenziel, SOMO, Netherlands [email protected]; Peter Pennartz, IRENE, Netherlands [email protected]; Ciro Torres, IBASE, Brasil [email protected]. 106

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Notes 1. OECD Watch – the provisional name for a body to help facilitate NGO activities around the OECD Guidelines and the work of the Committee on International Investment and Multinational Enterprises (CIME) – was established at a meeting in Amersfoort, the Netherlands on 20-22 March 2003 organised by FOE Netherlands, IRENE and EED (with support from SOMO, Germanwatch and Novib) and with 50 NGO and trade union participants from about 20 developing and developed countries. 2. OECD Guidelines for Multinational Enterprises (2000), Preface paragraph 2. 3. CIME Statement, Section VI, 2003 Summary Report of the Chair of the Meeting on the Activities of NCPs.

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Part II

ROUNDTABLE ON CORPORATE RESPONSIBILITY: ENHANCING THE ROLE OF BUSINESS IN THE FIGHT AGAINST CORRUPTION – MAKING THE MOST OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES

Acknowledgements The National Contact Points and the OECD Committee on International Investment and Multinational Enterprises wish to thank all of those who invested their time and resources in order to participate in the Roundtable on Corporate Responsibility held in conjunction with the third annual meeting of the National Contact Points. Their names appear below. The Roundtable participants included representatives from business, labour and non-governmental organisations. Roundtable Speakers and Outside Participants Chair: Dr. Elaine Drage, Director, Department of Trade and Industry, United Kingdom; Head of the UK Delegation to the OECD Working Group on Bribery in International Business Transactions. Opening remarks: Mrs Berglind Asgeirsdottir, Deputy Secretary General, OECD. Speakers: Mr. Jermyn Brooks, Executive Director, Transparency International, Germany. Mr. David Cockroft, General Secretary, International Transport Workers' Federation (ITF), United Kingdom. Ms. Kirstine Drew, University of Greenwich and UNICORN: Global Trade Unions Anti-corruption Project, United Kingdom. Mr. Janez Lotric, President of the Board, Petrol d.d, Slovenian Oil Company, Slovenia. Mr André Madec, Chad Development Executive, Exxon Mobil, United States. Mr. Sander van Bennekom, NOVIB (Oxfam), Netherlands. M. François Vincke, Avocat au Barreau, Willkie Farr and Gallagher, Belgium and Chair of the Commission on Anti-Corruption, International Chamber of Commerce. Ms. Alexandra Wrage, Senior International Counsel, Northrop Grumman Corporation, United States and President, TRACE International, United States and United Kingdom.

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Summary of the Roundtable Discussion The OECD Roundtable on Corporate Responsibility is held in June every year in conjunction with the annual meeting of the National Contact Points (NCPs). The 2003 Roundtable invited leading anti-corruption practitioners to discuss how the business sector’s contribution to the fight against corruption might be enhanced. It focused, in particular, on governments’ roles in this effort and on how the OECD Guidelines for Multinational Enterprises can be used in synergy with other anti-corruption instruments.1 The Roundtable was chaired by, Elaine Drage, the Head of the United Kingdom’s delegation to the OECD Working Group on Bribery in International Business Transactions (WGB). NCPs and delegates to the WGB attended the meetings. The Roundtable was held under the Chatham House rule2 to allow for a candid and constructive discussion. During the Roundtable, representatives of the business, labour and NGO communities were invited to present their views on three topics: • Current business practices in the fight against corruption. • Governments and business – forming effective partnerships. • The contribution of the OECD Guidelines to the fight against corruption. This summary is organised into four sections. The first section – “Background” – sets the scene by reviewing such issues as business incentives and allocation of responsibilities in the anti-corruption field. This is followed by three sections covering the topics listed above. Background In her opening address to the Roundtable, Deputy Secretary General Asgeirsdottir – who heads OECD work on sustainable development, including its follow-up on the Johannesburg Summit – noted the relevance and timeliness of the Roundtable. In order to meet the Summit’s goals in such areas as clean water, sanitation, adequate shelter and food, energy and health care, the world will need both honest governments and honest companies. Roundtable participants stressed the high human and economic costs of corruption and its “devastating”

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impact on economic and political processes. One participant cited a recent speech by Kenya’s Minister of Justice, who stated that all the average Kenyan has to do to measure the costs of corruption is to look out his front door. Likewise, private sector corruption has disrupted investment processes, inflicted heavy losses on shareholders and disrupted financial planning in millions of OECD households. Corruption is now high on political agendas. This is underscored by the June 2003 G8 Evian Summit’s “Action Plan on fighting corruption and improving transparency”. Participants noted large number of anti-corruption initiatives that are being undertaken by the business community and other actors. International organisations’ efforts were also cited, including the United Nations Convention currently under negotiation. The role of the Phase II reviews under the OECD Convention in raising awareness of anti-corruption issues in the 35 signatory countries was highlighted.3 These efforts and many others have moved the issue onto the centre stage of public policy. This, in itself, is a form of progress. While participants were encouraged by the high priority now being assigned to the fight against corruption, the overall tone of the Roundtable was mixed. In terms of coming to grips with the reality of corruption on the ground, one NCP noted that he was impressed by “how little progress had been made so far and how much remained to be done”. Despite the large number of important initiatives undertaken to date, further sustained efforts by many actors will be required to win the fight against corruption. Broad cultural change needs take place and the conditions must be created that will permit the basic components of effective anti-corruption systems (rights, institutions, know-how) to emerge. Is corruption a good business strategy? Participants pondered the question of whether or not corrupt business practices are profitable for businesses. As pointed out by one NCP-WGB delegate, this question is crucial for understanding how governments and other actors can address the problem most effectively. If corruption is rarely or never a profitable business strategy for individual employees or companies, then the fight against corrupt business practices becomes a self-enforcing proposition – through trial and error, companies will tend to converge on a set of non-corrupt practices. On the other hand, if corruption is highly profitable, then strong deterrence – including highly punitive penalties (fines and jail sentences) and supporting detection efforts – is needed to offset the strong economic incentives favouring corruption.

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The Roundtable discussion of this fundamental question did not produce clear-cut answers. Indeed, the range of participants’ answers – covering individual employee interests versus company interests; individual companies versus the interests of the business sector as a whole and short-run versus long-run consider-

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Summary of the Roundtable Discussion

ations – suggests that the benefits and costs of corruption for business are multifaceted and multi-layered: • The collective interests of the business sector. In the words of one participant, companies are looking for “business opportunities, not corruption opportunities.” Many business opportunities are lost when corruption is so commonplace that it undermines basic business functions – resources are misallocated; consumers pay higher prices for lower quality goods; investment processes are undermined. In addition, public policies are re-shaped in the interests of “hidden stakeholders”. For business, this means that basic public inputs to its activities – e.g. contract enforcement, prudential surveillance, investment in public infrastructure used by business – may also be undermined. Thus, in a macroeconomic sense, corruption does not pay for the business sector as a whole. Indeed, its costs in terms of foregone business opportunities are certainly enormous. • Sectoral interests. Some of the participants cited the collective interests of companies in sectors that are widely viewed by the outside world as being prone to corrupt practices. In such sectors (extractive industries were cited by one participant), highly visible episodes of corruption can undermine the reputation of all companies in the sector. Thus, the costs of corruption can include externalities that are borne by other companies operating in the same sector. • Individual employees in individual companies. Depending on the sector of activity, the operating environment, legal frameworks in home and host countries and companies’ anti-corruption compliance system the decision to bribe might be a good “career move” for individual employees and possibly also a profitable investment for the company that employs him. A trade union representative cited research documenting the use of bribes for such lucrative purposes as securing large scale procurement contracts, reducing prices of state assets to below fair market value or shaping public policy in ways favourable to the company. Alternatively, depending on the incentive system he faces (part of which is controlled by the company), the interests of an individual employee might diverge from the interests of shareholders – an employee’s decision to bribe could lower the value of the company (one business representative mentioned the problem of controlling “cowboy” employees). On the whole, though, the Roundtable’s message was there are circumstances where corruption is a profitable strategy, both for individual employees and for their companies. • Corruption also has costs for companies, even for those operating in environments where corruption is commonplace. Some participants mentioned longer term considerations and reputation effects – once a company starts paying

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bribes, it may find itself subject to escalating pressures to pay more. In contrast, if the company establishes a credible policy of not paying bribes, it realises longer term benefits – lower vulnerability to extortion and solicitation; improved positioning in the honest segments of the company’s market. However, some participants noted that, while reputation is important for some companies, it is a negligible competitive asset for others (e.g. enterprises operating in niche markets with little visibility outside their market segment). In addition, some participants noted that external actors (such as trade unions, NGOs, government officials) have a role to play in ensuring that reputation effects do exist (that is, reputation effects only exist if they are nourished by a supporting market and institutional framework). The general thrust of the Roundtable discussion was that the challenge for business and other actors is to escape from their “corruption trap” – it may be in some companies’ interests to engage in corrupt practices, but a coordinated and credible decision by all companies to forego such practices would enhance welfare, both for the business sector as a whole and for surrounding societies. An NCP-WGB delegate noted that this situation poses a problem of “collective action” – how can individual incentives to engage in corrupt practices be altered so that societies and their business sectors can enjoy higher welfare? As is often the case in such circumstances, governments can play a role in helping companies achieve a co-ordinated, welfare-enhancing response (through regulation, law enforcement, information provision, etc.). In addition, business associations can help to provide responses to the business sector’s collective action problem. Business associations (including those organised along sectoral lines) and certain NGOs play an important role in helping companies meet their collective needs. Roundtable participants noted that business associations and NGOs are already active in this area – their roles in developing best practices manuals for anti-corruption compliance programmes and due diligence standards for vetting agents were cited as examples. Governments and trade unions have co-operated with the business community in many of these efforts. Victims or perpetrators of crime?

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Companies are often victims of crimes of extortion ranging from minor incidents to serious episodes which endanger or take the lives of employees. Because companies are both victims and potential perpetrators of crime, they find themselves in an inherently ambivalent position. At several points during the Roundtable discussions, the question of who bears responsibility for corruption – for example, the official soliciting money or the corporate actors who pay it – was raised. Several participants felt uncomfortable with the premise that appeared at

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times to underpin the business sector’s perspective on this issue. They reminded the Roundtable that, after all, corruption is a crime and that companies that give bribes are as guilty as the officials who accept them. Lack of responsibility in the public sector cannot be used as excuse for corporate irresponsibility. While recognising that extortion is an important consideration, several participants stressed that companies often do have a choice. In environments in which recourse to corruption is essential for survival, companies can choose not to conduct business or not to invest. By criminalising bribery of foreign officials, the OECD Convention implicitly asks companies to forego business that cannot be conducted without bribery. An NCP acknowledged that this is extremely costly for some companies in some circumstances, but he also stated that it will strengthen the motivation for companies to call on governments to establish conditions in which business can be conducted with integrity. Current business practices in the fight against corruption Participants described the growing interest in the managerial component of the fight against corruption. Three recent initiatives were presented to the Roundtable that provide guidance to companies in organizing their anti-corruption efforts – the International Chamber of Commerce’s recently revised “Corporate Practices Manual”4 on fighting corruption, Transparency International’s “Business Principles for Countering Bribery”5 and the “TRACE Standard for Doing Business with Intermediaries Internationally”.6 These aim to provide practical tools to which companies can look for a comprehensive reference for good anti-corruption practice. The Roundtable discussion of business practices focused on corporate policies, management systems and reporting. Corporate policy and problems of definition At a conceptual level, corruption is easy to define – “misuse of entrusted power for personal gain” was the definition proposed by one participant. But moving from generalities to useful behavioural guidance for employees confronted with corruption in their immediate business dealings poses serious problems for many companies. One delegate noted that corruption is a multilayered phenomenon that may not always lend itself to neat definitions – lack of clarity and need to account for specific circumstances may be permanent features of the fight against corruption (he also noted that this creates a role for flexible instruments such the Guidelines). Nevertheless, Roundtable participants stressed the value of ongoing efforts to clarify the meaning of corrupt business practices in the many grey zones encountered in this area. Facilitation payments were described as “a dinosaur from the Foreign Corrupt Practices Act”. Legislation that permits such payments may create ambiguities when companies try to define permissible practices and management problems in

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global companies’ where employees of different nationalities might be subject to different legal constraints. The list of other issues identified by participants as requiring clarification includes: 1) use of agents, other business partners and subsidiaries; 2) political contributions; and 3) integrity of private-public transactions in such areas as outsourcing of public services and privatisation. Management systems The purpose of anti-corruption management systems is to shift the balance of incentives facing employees in favour of non-corrupt practices and to allow for credible management of corruption-related risks. The systems deploy a wide range of management tools including: communication of company policies (e.g. through codes of conduct); training programmes; ombudsman facilities; internal and external monitoring; control systems vis-à-vis business partners (agents, suppliers, etc.); and human resources management (hiring, firing, promotion, compensation). Participants noted that anti-corruption management systems needed to combine top-down components (involvement of the Board of Directors; leadership from top executives) and bottom-up components (in recognition of the fact that lower level personnel often make the decisions that determine anti-corruption outcomes). An NGO representative stated that most companies’ management efforts are shallow; for example, few give concrete advice to employees who are on the front lines facing bribe solicitors. He suggested that there is an urgent need for companies to deepen their management practices in this field – going beyond codes of conduct and integrating anti-corruption considerations into the basic management processes of the company. Participants identified management of the supply chain and of other business partners as a crucial consideration – business participants suggested that there is a need for greater “due diligence” in this area. One company represented at the Roundtable does media searches, examines financial records; and conducts personal interviews when vetting its business partners. Participants felt that this is an area where best practices and cost effective standards might bedisseminated. Reporting and information disclosure One participant described what he saw as the “huge demand” for corporate disclosure in the anti-corruption field – a demand that has to date remained largely unmet (the background documentation for the Roundtable found that only a handful of the top 100 multinational enterprises report on their performance in this area). Several possible explanations for this were proposed:

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• Lack of widely-accepted behavioural norms. One participant stated that performance reporting might be premature in the anti-corruption field. He stressed the need to work on developing consensus on the behavioural and

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management norms that underpin performance reporting. Reporting will come later once this basic infrastructure is in place. Not all participants agreed with this point of view – they thought it exaggerated the obstacles encountered by companies in this area. Another participant thought that companies might be reluctant to report because of the patchy nature of the national legal frameworks they face – in publishing policies and performance, companies are placed in the uncomfortable position of either having to adopt the highest common denominator of available legal frameworks or to be seen as picking and choosing from among existing legal norms or as applying different integrity standards in different countries. • “Lack of charm”. A WGB delegate noted the “lack of charm” of corporate anti-corruption reporting compared with performance reporting in such areas as environment (where companies can point to environmental initiatives and local projects that have wide public appeal). One participant guessed that companies are “put off by the atmosphere of self indictment” that appears to accompany anti-corruption disclosure – there are potential legal repercussions and few positive stories to tell. However, with the raising of the profile of corruption as a corporate responsibility issue and the growing recognition that reputation and integrity can be an important asset, companies may find that incentives are becoming stronger to inform the public about the anti-corruption policies, systems and performance. • Lack of legal incentives. One participant noted that, in the United States, most of the anti-corruption cases that are prosecuted are self-reported and that companies may feel that they are not sufficiently rewarded for “coming clean” (companies that cooperate with the enforcement authorities may, but are by no means certain to, benefit from reduced sentences in some national systems). Governments and business – forming effective partnerships Roundtable participants considered how governments, business and other actors might join forces in their common fight against corruption. Complex interplay between corporate responsibility and government responsibility One of the traditional themes of the OECD Corporate Responsibility Roundtables is the close link between corporate responsibility and government responsibility – business cannot do its job properly if governments do not do theirs. The 2003 Roundtable reaffirmed the relevance of this theme and identified corruption as an area where government and corporate responsibilities are particularly tightly inter-twined. One NCP noted that further progress in enhancing government responsibility – e.g. through more disciplined fiscal policies, appropri-

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ate regulation and social policies, improved public sector transparency and, more generally, a sharpened focus of governments’ areas of core competence and the elimination of government-created barriers to entry that foster cultures of rentseeking and rent-protection – would facilitate the fight against corruption. A trade union representative stated that the ongoing re-shaping of the public sector – virtually across the globe – was having a major impact on opportunities for corruption. He noted that privatisation and outsourcing of formerly public sector activities had, in some cases, created windfalls for corrupt actors. NGO participants corroborated the view that privatisation and outsourcing of public services had created such windfalls. An NCP suggested that, in principle, privatisation should be an important measure for enhancing transparency and combating corruption. The Roundtable did not explore the common ground that might link these apparently divergent perspectives, but it did identify the management of public-private alliances, partnerships, privatisations and other dealings between governments and private businesses as a topical anti-corruption issue. Private initiatives, law enforcement and other pillars of anti-corruption systems The Roundtable discussions exposed doubts about how serious and credible the actions of both business and government actors are in the anti-corruption field – both appear to suffer from serious credibility gaps. Participants recognised that there are no fail-safe approaches to law enforcement and private compliance. However, business, trade unions and NGOs largely agreed that, despite ongoing progress, there is a need to strengthen the current array of anti-corruption measures. Participants identified the following needs for future action by governments: • Show political will through stronger deterrence. Some participants stressed the need for zero tolerance in law enforcement as a way of showing that governments are serious about fighting corruption. Several noted that the OECD Convention is of no real use if it is not enforced – the 34 governments that have ratified the Convention should prosecute whenever they can. • Make better use of existing instruments. Many anti-corruption, pro-integrity instruments already exist – the OECD Convention, private initiatives, the OECD Guidelines. All actors need to work together to use these existing instruments more effectively. In particular, several participants urged NCPs to “look for complementarities” between OECD anti-corruption efforts and the United Nations Convention currently under negotiation.

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• Clarifying the definition of corruption. Business, trade unions, NGOs and governments need to co-operate and make further investments in clarifying the definition of corruption. They should reflect on and formalise thinking about which business practices are appropriate and which are not. Facilitation payments were identified as being particularly problematic in this

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respect and as an area where further work is urgently needed to clarify the boundaries of acceptable behaviour. Political contributions, use of agents and other business and subsidiaries were also specifically cited. • Reinforce the rights framework. NGO and trade unions stressed the need to strengthen the rights framework – strong and effective trade unions and active civil society organisations are widely recognised as key pillars in the fight against corruption. Trade union representatives urged the NCPs to explore the linkages between freedom of association and corruption and stressed the importance of protection of whistleblowers. • “Telling out of school”. The trade union, NGO and business communities all expressed the view that information is available – but not currently used – that would be useful in the fight against corruption. An NGO representative invited all actors to become more active in “telling out of school” – that is, in ensuring that the information that is available in corporations, governments, trade unions and NGOs is better channelled and used in the fight against corruption. For their part, business representatives noted the procedural difficulties of whistle-blowing in some host countries (e.g. law enforcement authorities may not be receptive to their information) and its potential high costs (e.g. testifying in court against bribe solicitors, when competing companies do not, could be bad for business). They asked for assistance from governments in making information on bribe solicitors available to the appropriate authorities (see below). • Improved public sector transparency. The role of improved private and public sector transparency in the fight against corruption was highlighted several times. One participant described on-going efforts to enhance transparency in the context of Chad oil development: the multinational enterprises involved will disclose their payments to the government; the government has agreed to establish a committee involving both government and civil society groups in order to monitor implementation of the government’s commitments on the allocation of oil revenues to pre-agreed development priorities. NGO participants expressed the hope that this approach would prove effective and noted that extractive industry transparency issues continue to be a challenge for governments, businesses and civil society representatives. • Governments and NGOs from the developing world. Corruption is not a problem that can be solved by remote control. Governments, NGOs and trade unions from the developing world need to be more involved in OECDbased anti-corruption efforts. Participants urged OECD-based actors to make it clear that they intend to put their own house in order – corruption is not just a problem for developing countries. In addition, some participants felt that OECD governments and international organisations are not always

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as supportive as they could be of non-member governments’ efforts to investigate corrupt business practices involving OECD-based corporations. • Whole of government approach. Governments can raise awareness of the importance of the business sector’s contribution to the fight against corruption through a broad array of government programmes. They should take steps to see that anti-corruption objectives are fully reflected in such programmes as Overseas Development Aid, Export Credit Arrangements, and Investment Guarantees. • Embed corporate codes of conduct into management processes. There is a need to embed anti-corruption policies more deeply in the management processes of the company (e.g. through training programmes). This is mainly a job for business, but governments can also contribute by promoting good practices in this area and by encouraging companies to adopt effective compliance programmes. • Get the message to small- and medium-size enterprises. Governments need to enlist the support of small and medium-size companies in the fight against corruption. Larger companies can also help by promoting anti-corruption efforts among their business partners and in their supply chains. The contribution of the OECD Guidelines to the fight against corruption Roundtable participants noted that the Guidelines could become a key component of the OECD drive against corruption and warned against both exaggerating and underplaying their potential contribution. To the extent economic incentives strongly favour corruption, then formal law enforcement and deterrence is necessarily a central element in the overall anti-corruption strategy. However, participants also noted the loopholes in existing legal frameworks and the relative ease with which companies can use agents and other business partners to circumvent law if they are so inclined. In such cases, successful law enforcement will necessarily have to rely on the active cooperation of the business sector – the Guidelines can be used to help enlist companies in this cooperative effort. In addition, many business actors are willing and highly motivated allies in the fight against corruption. They share the general revulsion at its heavy human and economic toll. “Softer” instruments such as the Guidelines can provide a means for governments to work with the large pro-integrity faction within the business community. Participants also noted the broad scope of the anti-corruption provisions of the Guidelines, meaning that they can be used to address a wider range of issues than legally binding instruments.

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Participants provided some concrete advice to NCPs. They urged them to focus their anti-corruption efforts so as to exploit the obvious complementarities between the two instruments. The Guidelines should be used to address the

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many areas not already well covered by law and by the OECD Convention. A trade union representative suggested that the Guidelines be used to help “plug the loopholes in the OECD Convention” and specifically cited private-to-private corruption; political contributions; use of agents, other business partners and subsidiaries. Promoting disclosure in the supply chain was also highlighted as an important area (a recommendation that was also made at the 2002 Roundtable on responsible supply chain management). The Roundtable also urged greater efforts by NCPs in the following areas: • Raising awareness of the OECD Convention and the Guidelines. • Helping companies understand where they should draw the line between corrupt and acceptable business practices. • Encouraging companies to show more accountability in their anti-corruption efforts through voluntary reporting, such as that proposed by the Global Reporting Initiative or in the disclosure provisions of the Guidelines. Perhaps the most innovative proposal – for what might be called a “corporate whistle blowing” facility – came from the business community. Business representatives challenged the NCPs to assist companies confronted with solicitation of bribes and extortion. In particular, they asked NCPs to help them to store information about notorious bribe solicitors in host countries – at present this information is lost. Business participants explained that pursuing a judicial route for transmitting such information was not an option as no bribe is involved and companies’ appearance in follow-up court testimonies would expose them to a competitive disadvantage and possible retaliation. They argued that NCPs can act as non-judicial gatekeepers into home country governments for multinational enterprises wishing to lodge allegations of serious instances of solicitation. They considered that rendering such services is consistent with the second sentence of Guidelines Chapter VI (which states that enterprises should not be solicited or expected to render a bribe or other undue advantage) and with the provisions in Commentaries 45 and 46 of the Guidelines. In this scenario, NCPs would not investigate the allegations, but would channel information to Foreign Affairs Ministries or to other parts of government. Business argued that the simple fact that it is known that such information is being collected could have an immediate and significant impact on the solicitation. This is perhaps the first time that business has requested a service from the institutions responsible for the Guidelines – a fact that was welcomed by the NCPs. The practical difficulties surrounding the creation of such a corporate whistle blowing facility were noted by several NCPs, but there was also a clear readiness to give serious consideration to the proposal. 123

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Notes 1. Documentation used at the Roundtable included an issues paper, a fact finding study of the top 100 multinational enterprises’ anti-corruption policies and management and reporting practices and a review of the strategic positioning of the OECD Guidelines in relation to other major anti-corruption instruments. 2. The Chatham House Rule states that “participants are free to use the information received, but neither the identity nor the affiliation of the speaker’s, nor that of any other participant, may be revealed”. 3. More information about the Convention can be found at: www.oecd.org/daf/nocorruption/ 4. “Fighting Corruption: A Corporate Practices Manual” edited by Francois Vincke and Fritz Heimann. International Chamber of Commerce. Paris. 2003. 5. www.transparency.org/building_coalitions/private_sector/business_principles.html 6. www.TRACEinternational.org

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Opening Remarks Mrs. Berglind Asgeirsdottir, Deputy Secretary-General, OECD

Good morning ladies and gentlemen. I am very pleased to open the third annual Roundtable on Corporate Responsibility. In fact, I consider myself lucky that a prior work commitment prevents Deputy Secretary General Richard Hecklinger from being here today as it offers me an opportunity to attend the Roundtable for a first time. This year’s Roundtable looks at how we can enhance the business sector’s role in the fight against corruption. As the Deputy Secretary General responsible for OECD work on sustainable development, including the follow-up to the World Summit on Sustainable Development, I find this topic to be both relevant and timely. At Johannesburg, heads of state set the goal of increasing access by all of the world’s people to clean water, sanitation, adequate shelter, energy and health care, while also stressing that food security and protection of bio-diversity are basic requirements. Multinational enterprises have a unique contribution to make in meeting these needs. Indeed, without appropriate public policies and the immense financial, technological and human resources of multinational enterprises, it is safe to say that the Johannesburg Declaration’s ambitious goals will not be realised. But, as a prerequisite to meeting the basic needs identified at the Summit, we will need both honest governments and honest companies. Environmental policy, which is one of the areas I look after here at the OECD, offers a good example of this. Our work stresses the importance of effective environmental governance as an input for sustainable development – we promote the appropriate use of regulatory and tax instruments for environmental protection. But it is increasingly recognised that even well-designed environmental policies can be readily undermined by corruption. The United Nation’s Environment Programme’s African Environmental Outlook recently highlighted the need to contain corruption if African countries are to benefit fully from their natural resource wealth. We also note that corporate policies and management practices are inte-

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gral parts of the broader picture of environmental governance. Indeed, I am pleased that this is to be the subject of the 2004 Roundtable. The recent G-8 Summit Declaration links the fight against corruption and the push for transparency to the broader goal of promoting sustainable development and healthier investment climates in developing countries. The OECD fully subscribes to this goal. It seeks to advance it through its activities in such areas as combating bribery and corruption, promoting improved corporate governance, improving public sector management and creating more effective policies in such areas as environment, health and education. The G8 Declaration specifically mentions the OECD Guidelines for Multinational Enterprises and encourages companies to participate in their implementation. The Guidelines are also a key component in the Organisation’s follow-up to the WSSD. The Guidelines are part of the OECD’s broader “integrity package”, which also includes the OECD Convention, the Corporate Governance Principles and our various public sector management projects. Today’s Roundtable brings representatives from the OECD international investment and anti-corruption communities together. Through it, governments, business, trade unions and NGOs will join forces to explore how the OECD instruments – and the OECD Guidelines in particular – can best be used to promote integrity in the conduct of international business. The agenda that you have set for yourselves is a rewarding and challenging one. I look forward to following your discussions and to seeing you again at the 2004 Roundtable which I believe will focus on environmental governance.

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Business Approaches to Combating Corrupt Practices* Executive Summary The international business community’s anti-corruption efforts are essential parts of broader systems for fighting corrupt business practices. These also include formal law enforcement, where an appropriate regulatory framework is already in place, and regulatory and other public sector reform, where it is not. This paper looks at anti-corruption material published on the websites of companies in UNCTAD’s list of top 100 non-financial multinational enterprises. It seeks to understand these companies’ views of corrupt business practices as well as their anti-corruption management and reporting practices. The paper answers the following questions: • How many of the top 100 non-financial multinational enterprises make public statements on corruption on their websites? Forty three of the top 100 non-financial multinational enterprises present anti-corruption material on their websites. This is low relative to earlier studies of the top 100 companies’ propensity to make public statements on environmental issues (which exceeded 90 per cent). This low propensity might reflect several factors – lack of awareness of the issue, an unwillingness to discuss it publicly or the perception by many of the companies in the sample that corruption is not a major concern for them. • Do companies from different sectors show different propensities to include material on corruption on their website? Companies’ practices vary greatly, depending on their sector of operation – most extractive industry companies (8 out of the 12 oil and mining companies in the sample) publish lengthy anti-corruption statements. In contrast, only one motor vehicle company (out of 13 in the sample) publishes any material whatsoever. * This study was prepared by Kathryn Gordon, Senior Economist, International Investment and Capital Movements Division, OECD, and Ursula Wynhoven, Consultant. It was reviewed by the Committee for International Investment and Multinational Enterprises and the Working Group on Bribery.

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• What kinds of anti-corruption commitments do these statements contain? Is a shared view emerging on the kinds of business practices that are acceptable and on the management tools that are effective? Among the 43 multinational enterprises that discuss corruption on their websites, there is some evidence of progress toward a shared view in relation to “parties to bribery”: 33 companies mention private-to-private corruption, 26 mention bribery of public officials, and 25 mention both. Thus, 75 per cent of the companies discussing “parties to bribery” mention both sorts, whereas an earlier study, based on 1998 data, found that only one third of the companies mentioned both. However, the international business community continues to show wide divergences in their approaches to most other major issues – political activity, gifts and entertainment, facilitation payments. This could be taken to indicate a need for international dialogue and consensus building on the kinds of behaviours that are acceptable or unacceptable. • How do companies manage the fight against corruption? The managerial content of those statements that discuss corruption shows heavy reliance on a welldefined set of management tools. Seventy seven per cent (of the companies that discuss corruption) mention whistle-blowing facilities, 72 per cent accurate record keeping and 63 per cent contain threats of disciplinary actions. Other techniques include hierarchical controls, creation of a compliance office, and establishing a role for the Board of Directors. In a sense, then, this study suggests that a de facto management standard may be emerging. • Do companies report on their performance in this area? Reporting on company performance against their anti-corruption commitments is not common. Few of the 100 companies in the study report publicly on their performance in implementing these commitments. Seven provided a formal report and 6 had material such as press releases on corruption-related misconduct. I.

Introduction

The international business community’s anti-corruption efforts are essential parts of broader systems for fighting corrupt business practices. These also include formal law enforcement, where an appropriate regulatory framework is already in place, and regulatory and other public sector reform, where it is not.

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Companies’ anti-corruption systems typically involve written commitments on business ethics embodied in company mission, vision or value statements. In many cases, such statements are elaborated in company codes of conduct – or more detailed statements of policy. Such codes are voluntary expressions of commitment addressed to diverse audiences (employees, the general public, regulators). Issuance of these codes or public statements is frequently accompanied by

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Business Approaches to Combating Corrupt Practices

the adoption of management systems designed to help firms honour their commitments in their day-to-day operations. Some companies also report on their performance in this area. This study provides information on these three facets of companies’ anti-corruption activities – commitment (Section II), management systems (Section III) and reporting (Section IV). Section V summarises the findings and proposes some interpretations. The information comes from Secretariat analysis of the anti-corruption statements found on the home pages of the top 100 non-financial multinational enterprises. The list of companies was taken from the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2002.1 Annex 1 describes the methodology of the study and Annex 2 describes the attributes used to analyse the statements. This study builds on and updates earlier work done for the Working Group on Bribery’s publication, No Longer Business as Usual (OECD 2000)2 and is closely related to the CIME publication Corporate Responsibility: Private Initiatives and Public Goals (OECD 2001). In looking at this material, the study seeks to shed light on how managers conceive of corruption, of anti-corruption management systems and of their reporting and disclosure responsibilities. This approach is motivated by management theories which emphasise that the individuals involved in business organisations use “mental models” (or ways of interpreting information) when dealing with complex, dynamic business problems.3 The material available on companies’ websites provides insights into one particular type of mental model – models that companies make available on their websites for public scrutiny. It is not necessarily the case that these models are broadly shared by organisational actors in the companies that have published them – for example, operations or commercial managers may be using quite different models to deal with the conditions they encounter in the field. Nevertheless, the current period is one in which collective thinking about corruption is evolving. The legal environment has become more stringent in many jurisdictions and high-profile scandals have made it an important issue for political debate in a number of countries. Recent high-level political declarations (e.g. the Monterrey Consensus, G8 Action Plan for Africa, OECD Ministerial Communiqués) show growing international recognition of corruption as a major impediment to the effective functioning of the global economy. Companies’ publicly available material sheds some light on the importance they attach to the issue, their views on corrupt business practices and on their management and reporting responsibilities. In summarising the anti-corruption content of major companies’ websites, the paper provides data relevant for answering the following questions: • What percentage of the top 100 non-financial multinational enterprises makes public statements on corruption on their websites?

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• Do companies from different sectors show different propensities to include material on corruption on their website? • What kinds of anti-corruption commitments do these statements contain (e.g. bribery of public officials, private-to-private corruption)? Do these commitments show evidence of the emergence of a de facto standard – or shared view among international companies – on the kinds of activities and practices that are considered to be acceptable? • How do companies manage the fight against corruption? Is there any evidence that companies’ anti-corruption management systems are becoming more similar to each other over time? • Do companies report on their performance in this area? II.

Business Perspectives on Corrupt Business Practices – Policies and Commitments

The difficulty of framing anti-corruption commitments resides mainly in identifying and describing the transactions to be proscribed – that is, in developing a workable mental model of what is acceptable and what is not. The connotation of the words “bribery and corruption” includes the general idea of unethical transfers of resources – but developing useful norms for business conduct requires moving from this general characterisation to a more operational description. Often, the challenge of developing an operational definition of corruption takes companies into “grey areas” where the boundaries between right and wrong are not clearly drawn.4 This section reports on whether and how the top 100 multinational enterprises address this challenge (see Table 1). The section examines the following issues: propensity to discuss corrupt business practices; approaches to anti-corruption commitment; extortion; facilitation payments; culture and local custom; gift giving and entertainment; political activities and/or contributions; business partners, and suppliers and subsidiaries. Propensity to discuss corrupt business practices

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This study finds that 43 of the top 100 non-financial multinational enterprises publish material that deals explicitly with corrupt business practices. This is lower than the propensity found in an earlier study of the top-100 list companies’ statements on environment, labour relations and health and safety (Figure 1). Companies’ public statements show an apparent preference for more positive terms like “integrity”, “honesty” or “ethics” to describe company commitments in this area and reluctance to use terms like “bribery” or “corruption”. Twenty of the company websites contained general statements (e.g. “we observe strict ethical standards”)

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Table 1. Corruption content of the top 100 multinational enterprises’ public statements Attributes

Per cent of top 100 companies with material on their websites

Bribery/corruption mentioned Parties to bribery: Bribery of public officials Bribery of private actors Both

26 33 25

Activities mentioned: Offering and/or giving bribes Receiving and/or soliciting bribes Political contributions/activities Proscribed if violation of law Proscribed if causes embarrassment Proscribed if improper or gives appearance of impropriety Permitted with approval Permitted to protect/advance legitimate company interests Permitted if consistent with local tradition/culture Facilitation payments Gifts and/or entertainment Proscribed if excessive/exceeds normal business customs Proscribed if inducement to business Proscribed if gives appearance of impropriety etc Proscribed if in violation of laws Proscribed if damaging to reputation Proscribed if above a specified value

32 33 35 17 2 2 17 10 2 10 30 23 23 17 10 5 3

Other Suppliers and/or business partners to follow same/similar principles Subsidiaries to follow same/similar principles Agents not used to undertake proscribed activities/to follow same or similar principles Explicit reference to culture/local customs in the context of gifts and/or entertainment

22 32 22 18 14

Source:

43

OECD.

which could be construed as referring to corrupt business practices (and to other issues, as well) without explicitly mentioning them. These companies are not included among the 43 companies counted as having anti-corruption statements on their websites. The study also shows that companies from different home countries and operating in different sectors have different propensities to publish anti-corruption material on their websites5 (Figure 2). Only one of the 13 motor vehicle companies in the sample published anti-corruption statements, while eight of the 12 extractive industry companies do so. Six of the 12 companies in “electrical and electronic equipment” publish such material.

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Figure 1. Policy statements by issue area Number of companies in top-100 list making statements 100 97

95 80

82

60 40

43

20 0 Environment

Labour relations

Health and safety

Corruption

Note: The first three bars are taken from OECD (May 2001) and the fourth bar from the present study’s findings. The two studies use identical text scoring methodologies, but data correspond to two different UNCTAD lists of top 100 multinationals. Source: OECD.

Figure 2. Anti-corruption statements by sector of activity1 Per cent of companies in sector sample 80 70

67

60 50

50 40 30 20

8

10 0 Extractive industries

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Electronic or electrical equipment

Motor vehicles

1. The three sectors in this figure are those that have more than 10 companies in UNCTAD’s top-100 list. Source: OECD.

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Approaches to commitment – what and who? “Never give, offer, or authorize the offer, directly or indirectly, of anything of value (such as money, goods or a service) to a customer or government official to obtain any improper advantage.” From the code of conduct of a network services provider The websites also show a wide range of approaches to defining corruption. Many do not attempt to define “bribery” and “corruption”, while others give detailed guidance on activities that, in the company’s view, are acceptable or unacceptable. A number of the websites make use of case studies or questions and answers to help employees and others understand the company’s commitments and policies. The public statements vary widely in their vocabulary and language. For example, the following words were used to describe the resources that might be transferred in the course of a corrupt transaction: undue advantage, anything of value, contribution, gratuity, service, gift, hospitality, entertainment, improper payment, benefit, discount, tip, kickback, incentive, donation, illegitimate/personal favour, property, or illegal/improper receipt. When describing acceptable payments, gifts, entertainment or other benefits, words such as appropriate, legitimate, reasonable, business-related, courtesy, token, modest and nominal were often used. Thirty three of the companies in the study address private-to-private bribery, while 26 explicitly mention bribery of public officials. Only 1 company limits its discussion to bribery of public officials while 8 companies discuss only private-toprivate bribery. This finding contrasts with an earlier study6 which showed companies roughly evenly divided among those that mention only bribery of public officials, those that mention only private-to-private corruption and those that mention both. This finding provides some evidence of (limited) progress toward a common definition of corrupt business practices. The material deals with both active bribery (giving bribes) and the passive version (receiving them). Thirty-two per cent of the companies in the study prohibit offering and/or giving bribes, while 33 per cent prohibit attempts at solicitation and/or receiving bribes. Extortion A frequent terrorist and criminal tactic… is to attempt to extort companies into paying protection fee rather than risk reputation damage through association with the military. It is, however, possible to obtain army or policy protection that is both effective and free of human rights violation… we seek to keep any dealings with the military as transparent as possible. Petroleum company’s explanation of its policy on security forces

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The business community has pointed out on numerous occasions that many payments that might fall under the heading of corruption are actually payments made in response to extortion by private or public actors. It is somewhat surprising, given the attention paid to the issue by the business community, that extortion is mentioned only rarely in the companies’ statements. Two companies have material on their websites that describe actual cases of extortion or that mention the word “extortion” explicitly. Some of the texts dealing with operations in specific countries (e.g. Nigeria) describe experiences in those countries that could imply the company was a victim of an extortion attempt. Facilitation payments “In early 2001, [our company’s] position on [facilitation payments] received a lot of attention… We said... that whilst facilitation payments are discouraged... our policy allows them to be made at local management discretion. Many places do not recognise a difference between facilitation payments and bribes and some parties chose to portray [our company] as tolerant of paying bribes. We have accepted that our position on this matter should be strengthened to reinforce our overall strong anti-corruption stance. In February 2002, we introduced a new policy that makes it clear that [our company’s] staff anywhere in the world should not make facilitation payments from now on.” From a 2001 report of a petroleum company “In some countries it may be customary at times to pay government employees for performing their required duties. These facilitating payments, as they are known, are small sums paid to facilitate or expedite routine, non-discretionary government actions, such as obtaining phone service or an ordinary license... Understanding the difference between a bribe and a facilitating payment is critically important. Consult with your division legal counsel before acting.” From the website of a consumer products company

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Facilitation payments pose problems of interpretation for both managers and law makers as they attempt to differentiate between acceptable and unacceptable practices. For both, the problem lies in finding a formulation that recognises the difficult situations that enterprises may face in certain business environments without creating a loophole in anti-corruption norms. Ten of the companies in the sample discuss facilitation payments, but (as suggested by the two quotes above) there are divergences of view about whether company policy should tolerate such payments. A few of the companies prohibit them entirely and, in general, there appears to be an overall distaste for them. Some of the companies explicitly tolerate them and some set forth transparency mechanisms (e.g. requiring that such payments be authorised by senior company officials and properly recorded in the company records).

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Culture and local custom “Local customs, traditions, and mores differ from place to place, and this must be recognized. But, honesty is not subject to criticism in any culture.” From the website of a petroleum company Based on the material available on their websites, companies appear to be trying to come to grips with cultural differences in attitudes toward corruption. 27 of the websites mention culture and/or local customs in the context of discussing the company stance on facilitation payments, gifts and/or hospitality or other related ethical issues. In addition, the problems posed by what might be called the “endemic bribery” that exists in many countries are also mentioned in some of the statements. Sixteen companies call attention to the cultural dimension of giving gifts and entertaining, referring to the need to respect local custom. However, six websites also point out that culture should not be used as an excuse for violating ethical business practice, making statements such as “we should never confuse bad practice with culture” and “honesty is not subject to criticism in any culture (see quote above)”. Gift giving and entertainment We only exchange business courtesies when doing so helps build mutual trust and does not inappropriately influence decision-making. From the code of conduct of a telecommunications company The public statements show little evidence of a common model for describing acceptable or unacceptable gift giving and entertainment practices. Many of the websites contained language prohibiting employees (and sometimes also their family members) from accepting improper gifts and/or entertainment. 29 of the websites had material covering the company’s stance on “gifts”. 28 of them present material setting out the company’s position on entertainment. Most of these companies did not completely prohibit reception or giving of gifts or entertainment from or to business partners. Here, the line between acceptable business practice and bribery is, perhaps unavoidably, fuzzy. Companies use a variety of terms and concepts to provide guidance to employees on what is allowed and what is not. Concepts mentioned include: gifts or entertainment excessive in value and/or that exceed normal business customs (23 companies); gifts or entertainment that are an inducement to business (23 companies); gifts or entertainment that violate the law (10 companies); appearance of impropriety (17 companies), and damaging to the reputation or image of the company or a third party (5 companies). Three of the companies specify a monetary amount to guide employees as to what would be an unacceptable practice. The focus on

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“appearance” hints at the role of public opinion and social pressure in determining companies’ own assessments of what is and what is not acceptable conduct. Political activities and/or contributions [Employee question] Our office has been solicited to make a major donation to the mayor’s re-election campaign. He’s going to win easily, and our relationship with City Hall is important to us. Is this okay? [Company response] Donations to political campaigns or parties, whether at the local or national level, can only be made when approved by [our company’s] CEO. From “Questions and answers” published on a metal products company’s site The statements show a wide range of approaches to political activities and contributions. 27 of the companies make publicly available on their websites their policies on political contributions to persons holding office, candidates or political parties and/or the company’s involvement in political activities. A few companies have policies of refraining from participating in political activities and not making contributions to political parties. Many companies allow political contributions, in certain circumstances – for example, ten permit them if they protect or advance legitimate company interests. Seventeen companies subject such contributions to controls by management (e.g. by the Board or the CEO). In contrast, a few companies promote active involvement in political activities and note on their websites that they have established funds for channelling employees’ political contributions. Business partners, suppliers, subsidiaries and agents If you are authorised to engage agents, make sure that they are reputable and require them to agree in writing to [our company’s] standards in [the anti-corruption] area. From the code of conduct of a consumer electronics company

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Many of the websites indicate that the company encourages or even requires independent contractors, suppliers or business partners to comply with the company’s principles, including through the use of terms to this effect in contracts. 22 of the companies have provisions that prohibit use of agents to carry out activities that the company is itself prohibited, by its code of conduct, to do. 22 of the websites contain a similar provision regarding suppliers and business partners. 32 of the websites explicitly deal with the conduct of subsidiary companies, seeking to bind them (especially those that are wholly owned or controlled) or encourage them to comply with the same or similar principles, including by asking them to adopt their own codes of conduct based on the code developed by corporate headquarters. Not counted in this number are the numerous commitments to forego “the direct or indirect offer, payment, soliciting or acceptance of bribes is not permitted” (emphasis added).

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The content of companies’ discussions of these issues does not indicate major divergences of view. The main differences among the texts are their length and degree of detail. For example, a few texts provide detailed guidance on how remuneration of agents and the need to ensure that agents are reputable. Summary of anti-corruption commitments Because of fundamental differences in firms’ circumstances, complete homogeneity of their anti-corruption commitments is neither expected nor desirable. Taken as a whole, the material on company websites shows wide divergences in commitment practices. In particular, it points to: • The disinclination of a majority of companies in the sample to publish policies dealing explicitly with corruption. This could reflect a lack of awareness of the issue, reluctance to discuss the issue publicly (motivated, for example, by concerns that such discussions might create a presumption that the company has serious problems in this area) or the perception that corruption is not a material risk for their business.7 • A strong industry dimension to treatment of these issues. Companies in the extractive industry are much more likely than companies in other sectors to publish anti-corruption statements on their websites. • A lack of consensus on the nature and scope of anti-corruption commitments and the absence of shared vocabulary and concepts for making these commitments.8 In areas such as political contributions, facilitation payments, gifts and entertainment, the companies in the sample show little evidence of agreement in how they think about these basic issues. III. Management Tools in the Fight against Corrupt Business Practices Companies that participate in corrupted dealings... do themselves no favours. Although a business deal here or there may be obtained, the cost includes creating a culture of dishonesty within the company. If cheating or bribery or fixing the books are tolerated for certain purposes, a company can never again be sure that these dealings are not tolerated for others. The whole organisation can come to believe that dishonesty is an accepted approach. From the website a petroleum company This section describes what firms say on their websites about how they implement their anti-bribery commitments. Companies’ anti-bribery statements are evaluated for their implementation content – that is, for the specific management tools mentioned in the statements, including: statements addressed by top management to staff, establishing a role for the Board of Directors, whistle-blowing facilities and protection for whistleblowers, signatures of directors and/or managers, training, assigning managerial responsibility for various aspects of implemen-

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tation and compliance, compliance officers and committees, employee signatures, internal auditing and disciplinary action. Sometimes, companies endow existing structures within their organisation – for example, an internal audit committee – with new anti-corruption functions. A description of the various types of control mechanisms is given in Annex 2, along with sample texts found on company web pages. The quotation above exemplifies the link that some companies draw between the problem of combating corruption and the more general financial management control problems they face. They recognise that, when trying to establish a culture of integrity within the company, it is not really possible to separate integrity vis-à-vis particular actors (e.g. protecting shareholders’ interests) and integrity vis-à-vis society at large (e.g. complying with law, foregoing bribery). The management challenges of complying with anti-corruption norms are, in principle, quite similar to the general problem of asset protection and financial control (e.g. protecting against embezzlement, insider trading and conflict of interest). Management systems are key parts of broader systems for controlling business conduct. Firms often have to invest heavily in the acquisition of expertise in order to learn how to deploy different control instruments in response to different ethical and legal compliance challenges (controlling corrupt business practices poses different implementation problems from that of child labour in the supply chain). In this sense, getting the legal and civic environment right is only part of what is required for the successful prosecution of the fight against corrupt business practices – the other part concerns technical, managerial, and cultural processes within firms.9 Figure 3 shows that a commitment to keeping accurate financial records and reporting is a common implementation measure found on 72 per cent of the websites of companies that publish anti-corruption statements. Other internal measures are also typical – whistle-blowing facilities (77 per cent), protection for whistleblowers (60 per cent), creating compliance offices (42 per cent) or committees (37 per cent), reference to disciplinary action (63 per cent), ethics statements from top management (58 per cent), involving the Board of Directors in implementation or compliance efforts (53 per cent), requiring employees or managers to seek prior permission before engaging in certain activities (58 per cent), training (49 per cent), and requiring employees to report possible violations or ethics issues (53 per cent). Fourteen per cent of the websites contained explicit statements to the effect that companies’ ethical commitments were higher priority considerations than business performance and/or stating that employees would not be held accountable for business lost from complying with them. 138

The analysis of the managerial content of the 100 websites suggests that there is some variation of management practice in the fight against corruption – this is

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Figure 3. Anti-corruption management tools used Per cent of companies making anti-corruption commitments that mention tool 90 80

77 72

70 60

63

60

58

58 53

53

53 49

50 42 37

40

30

30 20

40

14

26 14

14

10

st

hi

W

W

hi

st

leb lo leb win Ac g l o cu we fac ra r p ilit te Ro fin rot y ec le an tio of c n M Bo ial r an a e r c ag d o rd of em s D en t r irec to es rs po Pr ns io rp ib E ilit er xte y r m iss nal Co au io m n pl /h dit ia Co nce iera rc /e m h t pl ian hics y To In c of te p e r ex co fice ec nal m a ut m ive udi i s’s t co ttee m et m hi it cs st tee at Em em e Th ploy Tr nt re ee ain at d M in en of d uty tio isc to g re n i p p o li Em f cri nar ort ya m pl i c n oy ee al s tion a re No qu ncti lo ire on st bu d to s sig M sin e an ag ss p n em e en nalt y ts ig n of f

0

Source: OECD.

normal as there can be no “one size fits all” approach. Nevertheless, the impression left by the analysis is that the firms with anti-corruption statements on their web-sites show considerable agreement as to the “choice of weapons” in the fight against corruption. The companies rely heavily on such compliance management techniques whistle blowing facilities, record keeping, hierarchical controls, threats of disciplinary action, creation of a compliance office, and establishing a role for the Board of Directors. In contrast to these companies’ anti-corruption commitments, these companies speak with some confidence and use shared vocabulary and concepts when discussing the management challenges of the fight against corruption. This apparent agreement may facilitate the emergence of standardised management systems for dealing with corruption. IV. Reporting on Corrupt Business Practices Reporting on company performance against anti-corruption commitments is not common. Seven of the companies include corruption-related material in their

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CSR reports. Six of the companies reported on corruption related events elsewhere on their websites (e.g. in press releases on corruption-related misconduct). In the entire sample, a total of 12 companies provided some sort of report on corruption-related performance. In contrast, well over half of the companies publish environmental reports. Possible explanations of the differences between environmental and anti-corruption reporting are: • The availability of standards that facilitate environmental reporting makes it easier for firms to undertake such reporting (while little guidance is available for anti-corruption reporting). • Companies might feel more at ease with reporting on environmental matters. They may see little “up side” to reporting on corruption. V.

Implications for Anti-corruption Practitioners

The fight against corruption needs to be conducted on a broad front and to draw on support from a wide variety of actors, especially the business community. The business community’s importance derives from the fact that it is on the front lines in the fight against corrupt business practices. Therefore, its understanding of acceptable business practices is important. Similarly, business’ management practices determine whether companies will actually be able to comply with the evolving legal framework and with growing societal pressures. Their reporting practices influence the ease with which outside actors can monitor the success of their anti-corruption efforts. With regard to management processes, the study suggests that firms deploy a relatively homogeneous set of practices in the fight against corruption and that a de facto standard of practice appears to exist. Compared with the way they discuss their policies and commitments in the fight against corruption, companies’ discussions of anti-corruption management draw on shared vocabulary and concepts. This consensus on management practice may reflect the fact that the fight against bribery draws on the same expertise and uses the same management tools as other areas of financial control. Thus, implementation of compliance programmes in bribery might well have strong, direct synergies with existing control processes. This differentiates anti-corruption compliance efforts from those in other areas. For example, the most influential environmental management standard – ISO 14001 – had to be negotiated over several years, a process that may not be necessary for anti-corruption management standards.

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In contrast to the apparent consensus on management issues, there is little evidence of a de facto standard on companies’ published anti-corruption commitments. Fifty-seven of the 100 top multinational enterprises do not explicitly acknowledge the issue on their websites. Although there is some evidence of progress toward a shared view on “parties to bribery” (relative the findings of an

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earlier study), the top-100 multinational enterprises show divergences on other major corruption issues – political activity, gifts and entertainment, facilitation payments. Thus, this study suggests that a need persists for international dialogue and consensus building directed at identifying acceptable and unacceptable business practices. The study also shows that, in contrast to their extensive environmental reporting, few companies report on their performance in this area. This finding suggests that it might be useful to consider the reasons for this and to reflect on whether or not such reporting would enhance transparency.

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Annex I

Methodology Definition of Public Statements This study is based on material sourced from the websites of the top 100 non-financial multinational or transnational enterprises as defined by UNCTAD. The list of companies concerned was taken from UNCTAD’s World Investment Report 2002. Collection of Material Relevant material was downloaded directly from the website of the companies. To bolster the accuracy of this process, the OECD Secretariat tried contacting many of the companies on the list via e-mail requesting a list of the material they had published touching on the subject of anti-corruption. However, relatively few responses were received. Even where other material was obtained, only material found on the websites was used. This material is available in paper form at the OECD and can be made available to interested delegations upon request. Scoring of Materials The material taken from the top 100 multinational enterprises websites was then scored by the OECD Secretariat. The scoring was made with reference to a list of attributes that was developed in cooperation with OECD anti-corruption experts and by reference to external texts (International Chamber of Commerce 1999, Pope 2000). The two Secretariat officials involved in the study duplicated a certain number of the scoring exercises so as to ensure that a common interpretation was given to each attribute. Each company’s score with respect to each attribute was entered as a zero-one variable into an Excel spreadsheet. See Annex II for this list of attributes and for some sample texts concerning each attribute. This material can be made available to interested delegations upon request. Advantages and Limitations Studies based on publicly available information avoid non respondent bias in surveys based on mailed questionnaire (that is, biases in findings caused by systematic differences between the companies that replied to the survey and those that did not). The methodology used here is also less vulnerable to biases introduced by interviewers in interview-based surveys. However, the methodology used for this study involves several limitations:

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• Because the study is based on material found on company websites, it is possible that many of the companies in the study have published material on anti-corruption or that bears on implementation of their anti-corruption commitments but have not made it

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available on the Internet. In other words, the lack of material may reflect a company’s publication policies rather than a lack of concern about corruption. Some company websites refer to codes of conduct or business principles that are not available on the website. • In addition, firms may rely on unwritten – and therefore unpublished in any form – procedures and practices that affect implementation. Material of this type was not included in the study. • Only English language versions of the websites were used for the study. It is possible that local language versions contained more content relevant to the fight against corruption. However, “local language” considerations might not be relevant for the top 100 multinational enterprises that are the subject of this study.

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Annex II

Attributes Used in Analysis of Anti-Corruption Statements Corruption dealt with: The website contains material expressly mentioning bribery and/or corruption. Company statements mentioning only integrity, honesty or ethical conduct, without further elaboration and mention of bribery and/or corruption, have not been included. Offering or giving bribes : Material on the website explicitly deals with the offering and/or giving of bribes or with payments, gifts, services, entertainment, favours, benefits etc. Example: “Never give, offer, or authorize the offer, directly or indirectly, of anything of value (such as money, goods or a service) to a customer or government official to obtain any improper advantage.” Receiving or soliciting bribes: Material on the website explicitly deals with the receiving and/ or soliciting of bribes or with payments, gifts, services, entertainment, favours, benefits etc. Example: “We will never request, accept or offer any gratuities or other payments for providing specific services.” Political contributions/activities: The Company’s stance on political activities and/or contributing to political parties is set out on the website. Example: “As a general rule, we refrain from participating in political activities in the name of [Company] or in organizing such activities on [Company] property… Whether or not local laws restrict the use of corporate funds in support of political parties, it is our general policy not to make contributions to political parties at any level of government…” Compare with: “The [Company] Civic Action Fund, supported by voluntary donations from [Company] employees, gives campaign contributions to national, state and local political candidates from both major political parties in [country]. A list of contributions made can be viewed at [link].” Facilitation payments: There is material on the website that describes the company’s stance on facilitation payments. Companies’ positions on this issue differ widely. Example: “[Company] will never offer, pay, solicit or accept bribes in any form, either directly or indirectly. This includes those transactions formerly known as facilitation payments.” Compare with:

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“In some countries it may be customary at times to pay government employees for performing their required duties. These facilitating payments, as they are known, are small sums paid to facilitate or expedite routine, non-discretionary government actions, such as obtaining phone service or an ordinary license… Understanding the difference

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between a bribe and a facilitating payment is critically important. Consult with your division legal counsel before acting.” Excessive or exceeds normal business customs: Material on the website prohibits or regulates gifts or entertainment with reference to its value (whether an amount is specified or not), frequency, reasonableness, or the fact that it is not in accordance with business custom or ordinary business practices. Alternatively, there may be a prohibition on gifts/entertainment that are not for business purposes or in a direct business context. Example: “We will only give or accept gifts and entertainment that are for business purposes and are not material or frequent.” Inducement to business: Material on the website indicates that employees are to avoid accepting hospitality or gifts that could place them under an obligation or that were intended to or might influence decision making. This can include a prohibition on accepting gifts or entertainment during particular decision making periods. Example: “No employee should seek or accept a gift, entertainment or personal favour which might reasonably be believed to have a significant influence on business transactions.” Appearance of impropriety, etc.: Material on the website prohibits or regulates gifts, entertainment or payments where there is or may be the appearance of impropriety. It must expressly mention “appearance” or how the gift, entertainment or payment will or may be “seen”, “construed” or “perceived”. Example: “No employee may, offer, give or receive any gift or payment which is, or may be construed as being, a bribe.” Violation of laws: Material on the website prohibits the giving or receiving of gifts or entertainment, making political contributions and/or other political activities that is against the law. “It is against [Company] policy to make unlawful, improper or other kinds of questionable payments to customers, government employees or other third parties.” Damaging to corporate reputation or image of company or TP: Material on the website indicates that gifts and/or hospitality are not to be given or received where they have the potential to negatively impact the reputation or image of the company or a third party. Only instances where reputation damage were mentioned with respect to gifts and/or hospitality were counted. Example: “Courtesy objects, such as small presents or hospitality gifts, are allowed only when the value of such objects is small and does not compromise the integrity and reputation of the partners and cannot be construed by an impartial observer as aimed at obtain undue advantage.” Subsidiaries to follow the same or similar principles: The website contains a provision requiring or encouraging subsidiaries (especially ones that are wholly owned or in which the company owns at least 50% of the voting rights) to adopt the same or similar principles. Example: “Subsidiaries and other controlled affiliates throughout the world must adopt and follow corresponding policies.” Agents not to be used to undertake proscribed activities : The website prohibits the use of agents to accomplish what the company cannot do without violating its own principles or the law, and/or requires that persons acting as agents for the company comply with the company’s anti-bribery commitments. Example: “We will not employ agents to carry out actions that conflict with these commitments.”

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Explicit reference to culture/local customs: The website mentions culture and/or local customs in the context of discussing the company stance on facilitation payments, gifts and/or hospitality. Example: “Local customs, traditions, and mores differ from place to place, and this must be recognized. But, honesty is not subject to criticism in any culture.” Commitment to accurate financial records : The public statements mention attempts to set forth quality standards for record keeping and reporting. Example: “All financial transactions are to be properly recorded in the books of account and accounting procedures are to be supported by the necessary internal controls. In turn, all Company books and records must be available for audit.” Role for the Board of Directors : The website describes a role for the Board of Directors in the implementation of the company’s anti-bribery commitments beyond merely adopting a code of conduct. Among other things, this could take the form of a Board sub-committee, delegating responsibility to a Board member to oversee implementation, Board member involvement in a compliance related activity (such as membership of a compliance committee or council), or requiring that progress on implementation be reported to the Board. Example: “The [Company] Board is responsible for ensuring these principles are communicated to, and understood and observed by, all employees.” External audit of compliance with anti-bribery commitments : Material on the website indicates that the company requests or intends to request that their performance against anti-bribery commitments be externally audited. This may take the form of a commitment to external verification or documents evidencing the audit itself. Prior permission required : Employees are required to seek prior permission before engaging in certain activity, such as receiving or giving gifts or entertainment etc. Example: “There may be situations when our business associates are invited to company social functions and wish to participate by sharing in the cost of the event. This may be acceptable, but should be approved by management beforehand.” Compliance and/or ethics office/officer or committee : The company has established a compliance office, officer or committee to be responsible for compliance with the company’s anti-bribery commitments. Example: “[Company] has established the position of chief compliance officer, who ensures compliance with the company’s Code of Conduct.” Anti-bribery role for the internal audit committee : The websites states that the company’s internal audit committee has been given a role in implementing the company’s anti-bribery commitments. Example: “In order to allow for the evaluation of the implementation and follow-up of the Compliance Program, the Compliance Director establishes an annual assessment liaising with the Compliance Officers. This assessment report is submitted to [Company’s] Audit Committee which can propose, for approval by the Board of Directors, all measures to improve its relevance and effectiveness.” Ethics statement from senior executives : The website contains a statement setting out the company’s anti-bribery commitment that is signed by the board of directors, the chairman of the board, the president or another high level executive. This often takes the form of a signed message to employees as a foreword to a code of conduct text, or it can be a merely a signature on the code or other statement itself.

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Training for compliance mentioned : Material on the website states that employees will be or have been trained on the company’s anti-bribery commitments, implementation and/or monitoring. Example: “[The Ethics Committee] advises the Group’s training departments on the inclusion of a presention of the Code of Conduct in every training program where it is appropriate, in particular those for new recruits and for management.” Whistleblowing facility : The website mentions the company ombudsman or a list of persons to contact with concerns and possible violations of the company’s anti-bribery commitment. Sometimes multiple communication channels are identified, with a request that employees first inform their own supervisor if that is appropriate. The channels may include supervisors, other managers (including senior company management), a toll free telephone hotline, the company legal department, compliance officer or committee, an off-site ethics post office box, and/or a dedicated email account. Some of the channels may be made available to people outside the company, including the public. Some companies ask employees to continue to raise their issue using different company channels until the matter is dealt with. Example: Employees should report suspected Code violations to their manager or higher levels of management, to the Corporate Legal or Audit Departments, or to division legal counsel…” Protection for whistleblowers: The website indicates that some measure of protection is provided for whistleblowers. Typically, this takes the form of an anti-retaliation provision. Some companies state that reporting a violation will not absolve the whistleblower of responsibility if he or she was involved, but that the fact that the person came forward may be taken into account when determining the appropriate action to be taken. Example: “… [Company] will not tolerate threats or acts of retaliation against you for making [a] report.” Employee duty to report on possible violations: Material on the website states that employees are required to report possible violations of the company’s anti-bribery commitment. Example: “We will report to our superiors or those concerned, such as persons in the legal affairs office, when we suspect that our activities have violated the laws or corporate ethical principles. When an act in violation of law has occurred, we must immediately redress the violation, prevent it from recurring, and be rigid in handling the situation.” Threat of disciplinary action: The website material mentions that the company will take disciplinary action in the case of non-compliance with the company’s anti-bribery commitments. Example: “Employees who violate company standards may be disciplined up to and including dismissal, as well as be subject to civil and criminal charges.” Signature by employees: Material on the website indicates that employees are requested to sign that they have read the company’s code of conduct (which deals with bribery) and will comply with it. Example: “Within 15 working days of receiving this material, the new employee must have signed and returned a “Code of Business Conduct Acceptance Form’ … stating that they have read and understood these policies and agree to abide by them.” Management responsibility: Material on the website mentions that it is the task of managers to implement the commitments, monitor compliance and/or conduct periodic reviews. Example: “It is the responsibility of management to ensure that the Group Code of Conduct and standards are communicated, understood and acted upon. They must positively pro-

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mote them by personal example and are not entitled to permit exceptions to the required behaviour.” Management signature report : Material on the website indicates that managers are, from time to time, asked to certify that the employees they supervise are complying with the company’s anti-bribery commitments. Example: “[a]t reasonable intervals, managers confirm that they and those under their direction comply with the business principles.” Mentioning of possible criminal sanctions : Some companies explicitly refer to the fact that bribery is or may be against the law and raise the possibility of criminal sanctions for bribing foreign public officials or for false reporting. Example: “Dishonest reporting can lead to civil or even criminal liability for you or [Company].” Ethical commitments not to be subjugated to business performance: The website states that priority is to be given to ethical compliance even at the expense of business performance. Some of the websites also state that managers and/or employees will not be penalized for any associated loss of business. Example: “The obligations of [Company] leaders go beyond those required of all employees. Leaders in our company are expected to [b]uild and maintain a culture of compliance by: … Making sure that employees understand that business results are never more important than compliance...” Political activities to protect/advance company interests : The website material mentions that the company will or may engage in certain political activities, for example, lobbying and/or engaging in dialogue to protect or advance legitimate company interests. Example: “[The Company] is actively involved in political dialogue, putting its own positions to general debate and explaining its own interests.” Political activities and/or contributions are to be consistent with local traditions, customs or culture : The website material shows that the company requires that political activities and/or contributions respect local traditions, customs and/or culture. Example: “Every employee who could be considered as a representative of the [Company] is required to abstain from political activity in the countries in which he or she is not entitled to exercise civic rights and in which the [Company] is present. Employees must take care not to do anything which would be contrary to such countries’ traditions or cultures.” Political activities and/or contributions that are improper or may appear so : The website prohibits political activities and/or contributions that are improper or may appear so. Example: “[Company] and its associates may not make any improper contribution to candidates for public office, to political parties or other political interests which are not in accordance with the law or which would otherwise have the appearance of being improper.” Political activities and/or contributions causing embarrassment : The website shows that the company prohibits political activities and/or contributions that might embarrass the company. Example: 148

“Approval should not be given to any political contributions which, by their scale or affiliation, might embarrass the [Company].”

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Political activities and/or contributions require company approval : Material on the website shows that the company requires approval before certain political activities can be engaged in or contributions made by employees. Example: “No employee may make or commit to political contributions on behalf of the company without approval from the Office of General Counsel.”

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Notes 1. Table IV.1, pp. 86 ff. 2. A more detailed description of the same study can be found in Gordon and Miyake (2001). 3. These models are constructed, updated and disseminated by individuals through processes of learning and communication. The models combine concepts, values and knowledge of local or specific circumstances in organisations and allow individuals to respond coherently to new situations. To the extent that these models are shared by large numbers of business actors, then individual action will also be coherent at a group level. 4. Chapter 4 of a Report by the Ministry of Economic Affairs of the Netherlands (2001) contains a detailed description of these problems, as seen by Dutch companies. Definitional problems identified included facilitation payments, distinction between bribery and solicited donations to charities and foundations, and corruption versus extortion. 5. These findings about large sectoral and international differences in companies’ anticorruption practices echo findings reported in Control Risks Group (2002). 6. See OECD (2001; page 56) or Gordon and Miyake (2001). 7. Friends, Ivory and Sime (2002) find, using a mailed questionnaire survey methodology, that 58 percent of the companies in their sample viewed corruption as a material source of risk to their business. 8. A number of other analysts have noted that there is little consensus on what constitutes bribery and corruption. Kaufmann (1999) positions the search for taxonomy of corruption as a question for further “operationally-oriented” research. Gardiner (1993) also emphasises the need to make progress on building agreement on how to define corruption as the basis for a more concerted and effective anti-corruption effort. 9. Punch (1996) provides an extensive sociological and managerial analysis of the internal workings of corporate misbehaviour. See also Conley and O’Barr (1997) for a discussion of the cultural and managerial basis of corporate misconduct and Scholz (1997) for a discussion of how firms’ internal efforts fit with broader enforcement strategies.

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Bibliography Bardhan, P., 1997, “Corruption and development: A review of issues”, Journal of Economic Literature. 35, 1320-1346. Ben-Ner, A. and L. Putterman, 1998, Economics, Values and Organisation. (Cambridge University Press, Cambridge). Business for Social Responsibility, “Corporate Anti-Corruption Programs: A Benchmarking Study of 15 US-Based Multinational Companies”. Conley, J. and W. O’Barr, 1997, “Crime and custom in corporate society: A cultural perspective on corporate misconduct”, Law and Contemporary Problems 60, 5-22. . Control Risks Group, 2002, Facing Up to Corruption. Della Porta, D. and A. Vannucci, 1999, Corrupt Exchanges (Aldine de Gruyter, New York) Donaldson, T. and T. Dunfee, 1999, Ties that Bind (Harvard Business School Press, Boston). Elliott, K.A., 1997, Corruption and the Global Economy. (Institute for International Economics, Washington DC). Friends, Ivory and Sime, 2002. The Governance of Bribery and Corruption: A Survey of Current Practice by Friends Ivory and Sime. Gardiner, J., 1993, “Defining Corruption”, Corruption and Reform. 7, 111-124. Gordon, Kathryn and Maiko Miyake, 2001. “Business approaches to combating bribery: A Study of Codes of Conduct” Journal of Business Ethics. 34: 161-173. International Chamber of Commerce, 1999. Fighting Bribery: A Corporate Practices Manual. Kaufmann, D., 1999, “Research on Corruption: Critical Empirical Issues”, in A. Jain (Ed.), Economics of Corruption (Kluwer Academic Publishers, Dordrecht). 129-176. Rose-Ackerman, S., 1998, “Bribes and gifts”, in A. Ben-Ner and L. Putterman (Ed.), Economics, Values and Organisation. Cambridge University Press. Cambridge. 296-328. Miceli M.P. and J.P. Near, 1992, Blowing the Whistle: The Organisational and Legal Implications for Companies and Employees (Lexington Books, New York). Miethe, T., 1999, Whistle-blowing at Work: Tough Choices in Exposing Fraud, Waste and Abuse on the Job. (Westview Press, Boulder). Ministry of Economic Affairs of the Netherlands, 2001. Foreign corruption can now be prosecuted in the Netherlands: implications for small and medium-sized enterprises. North, D., 1990, Institutions, Institutional Change and Economic Performance (Cambridge University Press, Cambridge). Organisation for Economic Cooperation and Development, 2000. No Longer Business as Usual.

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Organisation for Economic Cooperation and Development, May 2001. “Codes of conduct – Exploring their economic significance”, TD/TC/WP(2001)10/FINAL. Organisation for Economic Cooperation and Development, 2001. Corporate Responsibility: Private Initiatives and Public Goals. Pope, Jeremy, 2000, TI Source Book 2000. www.transparency.org/sourcebook/ Punch, M., 1996, Dirty Business: Exploring Corporate Misconduct (Sage Publications, London, Thousand Oaks and New Delhi). Scholz, J., 1997, “Enforcement policy and corporate misconduct: the changing perspective of deterrence theory”, Law and Contemporary Problems 60, 253-266.

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Anti-Corruption Instruments and the OECD Guidelines for Multinational Enterprises* Executive Summary • The Guidelines seek to promote and facilitate companies’ contribution to the fight against corruption. • The anti-corruption content of the Guidelines is broader than that of the Convention and the Revised Recommendation, as the Guidelines cover private sector bribery, solicitation of bribes and extortion. They also encourage companies to extend their anti-corruption programmes to their subsidiaries and business partners. • The standards promoted by the Guidelines reflect more than just the perspectives of developed countries. These standards can be found in other inter-governmental instruments adhered to by a wide range of non-member countries. They have also been integrated in the anti-corruption initiatives of several international private sector associations. • The Guidelines’ distinctive contribution as an anti-corruption instrument is that it provides a framework through which governments and civil society can encourage companies’ contribution to the fight against corruption. Introduction The problem of corruption has been receiving growing attention in the past 15 years and various inter-governmental and non-governmental organisations have developed anti-corruption instruments. The OECD has adopted several policy instruments that contribute, directly or indirectly, to the fight against corruption. The 2000 Review of the OECD Guidelines for Multinational Enterprises resulted in the addition of a new chapter on combating bribery. This new dimension of the OECD Guidelines for Multinational Enterprises (hereafter the Guidelines) has been high* This study was prepared by Irène Hors, Economist, Anti-Corruption Division, OECD. It was reviewed by the Committee for International Investment and Multinational Enterprises and the Working Group on Bribery.

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lighted in the OECD Ministerial Communiqué of 2002. Under the heading “Ensuring integrity and transparency in the international economy”, OECD Ministers agreed “to continue to promote implementation of the OECD Guidelines for Multinational Enterprises, which provide recommendations for responsible corporate behaviour, in particular in such areas as transparency and anti-corruption”. How do the Guidelines relate to other inter-governmental and non-governmental anti-corruption instruments? This paper provides information that helps to answer this question. This paper is structured as follows. Part I gives an overview of the OECD integrity instruments and of seven major international anti-corruption instruments. Part II presents, in detail, the anti-bribery contents of the Guidelines and compares these with other instruments. Part III reviews the main international private initiatives in this field. I.

Overview of Key Inter-Governmental Integrity Instruments

I.1. OECD integrity instruments The OECD has 9 instruments that contribute to the fight against corruption. These instruments differ in their scope and functions. A first set of five instruments tackle the problem of bribery in international transactions: these instruments focus exclusively on bribery of foreign public officials in international business transactions “to obtain or retain business or other improper advantage”. This means, for example, that they do not cover facilitation payments, i.e. payments “made to induce public officials to perform their functions, such as issuing licences or permits”.1 They are, in chronological order of adoption: • The Recommendation of the Council on Combating Bribery in International Business Transactions and its revised version; • The Recommendation of the Council on the Tax Deductibility of Bribes to Foreign Public Officials; • The Recommendation on Anti-Corruption Proposals for Aid-Funded Procurement; • The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (hereafter the Convention);2 and • The Action Statement on Bribery and Officially Supported Export Credits. The second set of OECD instruments has not been designed exclusively to address corruption, but nevertheless contribute to the fight against it: 154

• The Recommendation of the Council on Improving Ethical Conduct in the Public Service Including Principles for Managing Ethics in the Public Service;

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Anti-Corruption Instruments and the OECD Guidelines for Multinational Enterprises

• The OECD Principles of Corporate Governance; • The OECD Guidelines for Multinational Enterprises; and • The Draft Guidelines for Managing Conflicts of Interest in the Public Service.3 These instruments have a broader anti-corruption scope than the first set of instruments. The Recommendation on Anti-Corruption Proposals for Aid-Funded Procurement, the Recommendation on Ethical Conduct in the Public Service and the Guidelines on Conflicts of Interest address both domestic and international public corruption. Even broader, the Principles on Corporate Governance and the Guidelines (see part II) can impact domestic and international, public and privateto-private corruption practices. Most of the measures recommended in these instruments, other than the Guidelines and the Principles on Corporate Governance, are to be implemented by governments. They fulfil four main complementary functions: • Repression: this includes defining offences (of bribery and related offences, such as money laundering) and setting up State mechanisms to investigate and sanction the breaching of the law. • Detection: this includes defining and supporting the role different actors can play detecting potential cases of corruption (for instance tax inspectors, auditors). • Prevention in a repression perspective: increasing the transparency of public and private operations, through for instance the adoption of measures to facilitate access to information. • Prevention in an incitation perspective: changing the logics of action which lead public or private actors to bribery. For instance, managing conflicts of interest in the public service allows protecting the integrity of official decision-making. Certain instruments also address the role of the private sector and recommend that companies undertake measures to make sure that their internal organisation and culture help prevent corruption. It is the focus of the chapter on bribery of the OECD Guidelines for Multinational Enterprises. These instruments present different synergies. For example, the Revised Recommendation on Combating Bribery in International Business Transactions (hereafter the Revised Recommendation) complements the Convention, as it contains the non-criminal elements of the sets of action engaged to curb bribery in international business transactions. Another instance is that both the Tax Deductibility Recommendation and the Exports Credits Action Statement derive from the criminalisation of bribery of foreign public officials: they define related rules and call for implementing measures, and in doing so, consolidate the definition of bribery of foreign public officials as an offence4. Yet another example is the Recommendation on ethical conduct in the public service, which addresses the demand side of

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international (and domestic) public bribery and thereby complements instruments focusing on the supply side. Synergies also exist between the Guidelines and other OECD integrity instruments in that the Guidelines encourage companies to comply with the standards spelled out in other instruments and therefore contribute to their enforcement. This function is a crucial contribution to the overall anti-corruption framework and it should not be overlooked. Theory and evidence suggest that compliance with the law does not depend only on the risk of being caught and the consequences associated with it, balanced against the profits provided by breaking the law (see Scholz, 1997).5 This in itself justifies the need for policy instruments such as the Guidelines and for measures that enhance and complement the deterrence effect of laws and sanctions.6 I.2. Some major inter-governmental instruments Other anti-corruption instruments have been developed by inter-governmental organisations, covering different geographical regions. This paper considers seven such instruments: • The Forty Financial Action Task Force Recommendations. • The Inter-American Convention against Corruption, developed by the Organisation of American States. • The European Union Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of Member States. • The Council of Europe Criminal Law Convention on Corruption. • The Council of Europe Civil Law Convention on Corruption. • The Southern African Development Community Protocol on Corruption. • The United Nations Draft Convention against Corruption. The Inter-American Convention and the EU Convention address domestic and international public corruption. The other five have a broader anti-corruption scope, as they address domestic and international public and private corruption. The strategies underpinning these instruments are similar to that of OECD integrity instruments, in that they aim to fulfil similar functions. We will see in part II how they address the role of companies in the fight against corruption.

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Table 1 summarises information on the year of adoption, the participating countries, the anti-corruption scope and the supporting institutional mechanisms for implementation of these 16 policy instruments.

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Box 1.

Major inter-governmental anti-corruption instruments1

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions The OECD Convention is relatively narrow and specific in its scope. Its sole focus is the use of domestic law to criminalise the bribery of foreign public officials. It focuses on “active bribery”, meaning the offence committed by the person who promises or gives the bribe, as contrasted with “passive bribery”, the offence committed by the official who receives the bribe. It does not apply to forms of corruption other than bribery, bribery which is purely domestic, or bribery in which the direct, indirect or intended recipient of the benefit is not a public official. It also does not include cases where the bribe was paid for purposes unrelated to the conduct of international business and the gaining or retaining of some undue advantage in such business. The OECD Revised Recommendation on Combating Bribery in International Business Transactions Whereas the Convention focuses on a specific issue, the criminalising of bribery of foreign public officials in a commercial framework, the Revised Recommendation contains the entire programme defined by participant countries to curb corruption in international transactions. It covers such areas as: taxation; company and business accounting and audit rules and procedures; banking, financial and other relevant provisions; public subsidies, licenses, government procurement contracts or other public advantages that could be denied as sanctions for bribery in appropriate cases. The Forty Financial Action Task Force Recommendations The Financial Action Task Force on Money Laundering (FATF) is an inter-governmental body whose purpose is the development and promotion of policies to combat money laundering – the processing of criminal proceeds in order to disguise their illegal origin. These policies aim to prevent such proceeds from being utilised in future criminal activities and from affecting legitimate economic activities. The Task Force members agreed to implement the forty FATF Recommendations, which set out the basic framework for anti-money laundering efforts. They cover the criminal justice system and law enforcement; the financial system and its regulation, and international cooperation. The Inter-American Convention against Corruption The Inter-American Convention against Corruption (IACC) is the first international convention against corruption ever adopted (from 6 March 1997). It has been ratified by 29 countries, and is broader in scope than the European and OECD instruments. The IACC provisions can be broadly classified into three groups: Preventive Measures; Criminal Offences; and Mutual Legal Assistance. 157

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Box 1.

Major inter-governmental anti-corruption instruments1 (cont.)

The European Union Convention on the Fight against Corruption Involving Officials of the European Communities or Officials of Member States This Convention stems from an attempt on the part of the European Union to address forms of malfeasance which are harmful to its own financial interests. It only deals with conduct on the part of officials of the European Community and its Member States. The conduct to which it applies is essentially bribery and similar offences, which States Parties are required to criminalise. It does not deal with fraud, money laundering or other corruption-related offences. The Council of Europe Criminal Law Convention against Corruption The Convention is drafted as a binding legal instrument and applies to a broad range of occupations and circumstances. It contains provisions criminalising a list of specific forms of corruption, and extending to both active and passive forms of corruption, and to both private and public sector cases. The Convention also deals with a range of transnational cases: bribery of foreign public officials and members of foreign public assemblies is expressly included, and offences established pursuant to the private-sector criminalisation provisions would generally apply in transnational cases in any State Party where a sufficient portion of the offence to trigger domestic jurisdictional rules had taken place. The Council of Europe Civil Law Convention against Corruption This is the first attempt to define common international rules for civil litigation in corruption cases. Where the Criminal Law Convention seeks to control corruption by ensuring that offences and punishments are in place, the Civil Law Convention requires States Parties to ensure that those affected by corruption can sue the perpetrators civilly, effectively drawing the victims of corruption into the Council’s anti-corruption strategy. The Civil Law Convention is narrower that its criminal law counterpart in the scope of the forms of corruption to which it applies, extending only to bribery and similar acts. It is not in force. The Southern African Development Community2 Protocol on Corruption In addition to defining and describing corruption as a problem, the purposes of the SADC Protocol on Corruption are threefold: to promote the development of anti-corruption mechanisms at the national level, to promote cooperation in the fight against corruption by States Parties, and to harmonise anti-corruption national legislation in the region. The Protocol provides a wide set of preventive mechanisms which include the development of codes of conduct for public officials, transparency in the public procurement of goods and services, access to public information, protection of whistle-blowers, establishment of anti-corruption agencies, development of systems of accountability and controls, participation of the media and civil society, and the use of public education and awareness as a way of introducing zero tolerance for corruption. 158

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Box 1.

Major inter-governmental anti-corruption instruments1 (cont.)

The United Nations Draft Convention against Corruption During 1999-2001, negotiations began to develop this binding international legal instrument, which would be global in both its approach to the subject and in its geographical application. The negotiations are expected not only to produce the specified instrument, but also to provide a valuable forum in which all Member States of the United Nations can assemble to discuss corruption issues, to develop effective measures against corruption, and to build broad international consensus in support of such measures. 1. This box borrows text from the CMI Policy Brief on International Legislation and Conventions on Corruption, December 2002, www.cmi.no 2. The Southern African Development Community (SADC) is an inter-governmental organisation established in April 1980 by Governments of the nine Southern African countries of Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia and Zimbabwe. This organisation has a Programme of Action, covering several broad economic and social sectors, namely, Energy, Tourism, Environment and Land Management, Water, Mining, Employment and Labour, Culture, Information and Sport and Transport and Communications. Other sectors are Finance and Investment, Human Resource Development, Food, Agriculture and Natural Resources, Legal Affairs and Health.

II.

The Anti-Bribery Contents of the OECD Guidelines for Multinationals, in Perspective with OECD Instruments and Other Major Inter-Governmental Instruments

The OECD Guidelines inter alia provide recommendations to multinational enterprises on what they should do to contribute to the fight against corruption. One of the ten chapters of the Guidelines, Chapter VI, focuses on bribery. Complementary elements can be found in two other chapters: Chapter II on General Policies and Chapter III on Disclosure. A first sub-part presents the anti-bribery contents of the text of the Guidelines, in comparison with the Convention and the Revised Recommendation. A second sub-part compares with other international instruments. II.1. The anti-bribery contents of the Guidelines, in comparison with the Revised Recommendation and the Convention A broad anti-bribery scope The introductory sentence of the sixth chapter, on bribery, states: "Enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage."

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Instruments

OECD integrity instruments and other inter-governmental anti-corruption instruments Anti-corruption scope

Adopted in

Participating countries in February 2003

Supporting institutional mechanisms for implementation

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OECD instruments on bribery of foreign officials in international business transactions 1. Revised Bribery of foreign public 1994, revised in May 1997 OECD member countries + OECD Working Group on Recommendation officials in international Argentina, Brazil, Bulgaria, Bribery in International business transactions Chile and Slovenia. Business Transactions (peer review monitoring mechanism) 2. Rec. on Tax Deductibility Bribery of foreign public April 1996 OECD member countries + OECD Committee on Fiscal of Bribes to Foreign officials in international Argentina, Brazil, Bulgaria, Affairs (self-assessment Public Officials business transactions Chile and Slovenia. reports) OECD Working Group on Bribery in International Business Transactions (peer review monitoring mechanism) 3. Rec. on Anti-Corruption Bribery of foreign public May 1996 OECD member countries + Development Assistance and Aid-Funded officials in international Argentina, Brazil, Bulgaria, Committee (implementation Procurement business transactions Chile and Slovenia. reports) OECD Working Group on Bribery in International Business Transactions (peer review monitoring mechanism) 4. Convention Bribery of foreign public Signed in Nov. 1997; OECD member countries + OECD Working Group on officials in international Entered into force in Feb. Argentina, Brazil, Bulgaria, Bribery in International business transactions 1999. Chile and Slovenia. (Only Business Transactions (peer Ireland has not ratified yet) review monitoring mechanism) 5. AS on Bribery and Bribery of foreign public December 2000 OECD member countries – OECD Working Party on Export Credits officials in international Iceland (and not relevant Export Credits and Credit business transactions for Ireland) Guarantees (survey of member countries)


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Table 1.

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Table 1. OECD integrity instruments and other inter-governmental anti-corruption instruments (cont.) Instruments

Anti-corruption scope

Other OECD integrity instruments 6. Rec. on Ethical Conduct Public corruption in the Public Service

Public and private corruption Public and private corruption

9. Draft Guidelines on Conflicts of Interest

Public corruption

Participating countries in February 2003m

April 1998

OECD member countries

May 1999 First adopted in 1976, revised in June 2000

Will be considered in April 2003


OECD Public Management Committee (comparative analysis and information sharing) OECD member countries OECD Steering Group on Corporate Governance OECD member countries + OECD Committee on International Investment Argentina, Brazil, Chile, and Multinational Estonia, Israel, Lithuania Enterprises (oversight and Slovenia. responsibility, reporting, clarification of meaning of recommendations) National Contact Points (promotion, soft whistleblowing facilities called “specific instances”, mediation and consultations)

OECD member countries

OECD Expert Group on Managing Conflicts of Interest (comparative analysis and information sharing)

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7. Principles of Corporate Governance 8. Guidelines for Multinational Enterprises

Adopted in

Instruments


Adopted in

Other inter-governmental integrity instruments 1990, revised in 1996 10. FATF Rec. Money laundering (public and private corruption being considered a predicate offence in most countries)

11. Inter-American Convention against Corruption

Public corruption

12. EU Convention on the Public corruption Fight against Corruption



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OECD member countries – FATF (peer review Czech Republic, Hungary, monitoring mechanism) South Korea, Poland and Slovak Republic + Argentina, Brazil, Hong Kong China, Singapore + European Commission + Gulf Co-operation Council Committee of Experts of the March 1996; Entered into Argentina, The Bahamas, Mechanism for Follow-up on force in March 1997 Belize, Bolivia, Brazil, the Implementation of the Canada, Chile, Colombia, Costa Rica, the Dominican Inter-American Convention against Corruption (peer Republic, Ecuador, El review follow-up Salvador, Grenada, mechanism) Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, the United States, Uruguay and Venezuela. (Barbados and Haiti have signed but not ratified yet.) Council of the European May 1997; Not entered into Austria, Belgium, Denmark, Union force yet Finland, Germany, Greece, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom (in italics: countries that have ratified)


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Table 1. OECD integrity instruments and other inter-governmental anti-corruption instruments (cont.)

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Table 1. OECD integrity instruments and other inter-governmental anti-corruption instruments (cont.) Instruments

Anti-Corruption Scope

13. Council of Europe Public and private Criminal Law Convention corruption on Corruption

Adopted in

January 1999; Entered into force in September 2002

Participating Countries in February 2003

Supporting Institutional Mechanisms for Implementation

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The Group of States against Albania, Andorra, Austria, Belarus, Belgium, Bosnia-and- Corruption (GRECO) Herzegovina, Bulgaria, Croatia, monitors the observance of the Guiding Principles in the Cyprus, Czech Republic, Fight against Corruption Denmark, Estonia, Finland, France, Georgia, Germany, (peer review monitoring Greece, Hungary, Iceland, mechanism) and, in the future, the implementation Ireland, Italy, Latvia, of the international legal Lithuania, Luxembourg, instruments adopted in Malta, Mexico, Moldova, Netherlands, Norway, Poland, pursuit of the Programme of Action against Corruption, Portugal, Romania, Russia, Serbia and Montenegro, Slovakia, including the Criminal Law Convention (for those Slovenia, Sweden, countries who will have Switzerland, the Former Yugoslav Republic of Macedonia, ratified). Turkey, Ukraine, United Kingdom and the United States (in italics: countries that have ratified)

Instruments


Adopted in

14. Council of Europe Civil Public and private Law Convention on corruption Corruption

September 1999; Not entered into force yet

Public and private 15. Southern African corruption Development Community Protocol on Corruption

August 2001

16. UN Draft Convention against Corruption

Under negotiation

Public and private corruption



Albania, Andorra, Austria, Belgium, Bosnia-andHerzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Lithuania, Luxembourg, Malta, Moldova, Norway, Poland, Romania, Slovakia, Slovenia, Sweden, the Former Yugoslav Republic of Macedonia, Turkey, Ukraine, United Kingdom (in italics: countries that have ratified) Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe

The Group of States against Corruption (GRECO) monitors the observance of the Guiding Principles in the Fight against Corruption (peer review monitoring mechanism) and, in the future, the implementation of the international legal instruments adopted in pursuit of the Programme of Action against Corruption, including the Civil Law Convention (for those countries who will have ratified). Committee for the implementation of the Protocol (self-assessment reports and information sharing)

–

To be determined – Ad Hoc Committee for the Negotiation of a Convention against Corruption


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Table 1. OECD integrity instruments and other inter-governmental anti-corruption instruments (cont.)

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As the identity of the other party involved in the bribery act is not specified, this party can therefore be a public official, a business person or a political party official. The anti-bribery scope of the Guidelines is therefore potentially broader than that of the Revised Recommendation and of the Convention. These two instruments apply to the active side of bribery of foreign public officials, whereas the Guidelines potentially cover public sector bribery,7 bribery involving political party officials as well as both the active and passive sides of private sector bribery (bribery transactions between private individuals or entities). As in the 1997 Revised Recommendation, the Guidelines do not cover bribery practices which are not for obtaining or retaining business or other improper advantage: this means that facilitation payments are excluded. Paragraphs 1 and 2 illustrate in more practical terms the general normative statement against bribery practices. These developments are particularly useful for business readers as they help clarify what is meant by combating bribery. “In particular, enterprises should: 1. Not offer, nor give in to demands, to pay public officials or the employees of business partners any portion of a contract payment. They should not use sub-contracts, purchase orders or consulting agreements as means of channelling payments to public officials, to employees of business partners or to their relatives or business associates. 2. Ensure that remuneration of agents is appropriate and for legitimate services only.” Chapter II states general principles that support the contents of the chapter on bribery. For instance, Chapter II states that companies should “refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework (…)”, which is consistent with the avoidance of situations potentially conducive to corruption acts.8 Solicitation of bribes and extortion9 If the issue of solicitation is mentioned in its preamble, the 1997 OECD Convention is exclusively aimed at criminalising the “supply” of bribes to foreign public officials. Solicitation and extortion fall outside of the scope of application of the Convention. The Working Group on Bribery organised in June and October 1999 two informal meetings with the private sector on solicitation.10 The purpose of the meeting was to consider whether governments should undertake actions to assist and support the private sector’s fight against solicitation and, if so, what actions would be most appropriate in the framework of the OECD. One of the conclusions of the June meeting was that the revised version of the Guidelines could provide the opportunity to give more prominence to the issues of bribe solicitation and extortion. Several references have thus been inserted in the Guidelines. The second sentence of the chapter on bribery: “Nor should

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enterprises be solicited or expected to render a bribe or other undue advantage” reflects the business community’s concern about the problems of the solicitation and extortion of bribes by public officials.11 Paragraph 45 of the Commentary on the Guidelines reinforces this statement, by saying that “governments should assist companies confronted with solicitation of bribes.” The recommendations made to companies in the rest of the chapter target both the fight against bribery and that of extortion (cf. for instance paragraph 3: “their activities in the fight against bribery and extortion”). Recommendations to multinationals Recommendations of measures companies should take to fight against bribery and extortion are made in paragraphs 2, 3, 4 and 5 of Chapter VI and in Chapters II and III. It includes the development of activities specifically targeting bribery and extortion, with training programmes and disciplinary procedures to ensure the adherence of the staff, and a proper remuneration of agents. The Guidelines (Paragraph VI.3 and III.5) also stress the importance of adopting a policy of transparency on these activities and of external communication more generally. This reflects well the fact that non-governmental organisations are an indispensable partner in facilitating co-ordination between the public and the private sector and in helping to build effective coalitions. The Guidelines recommend the adoption of adequate control systems, accounting and auditing practices. The Convention (Article 8: “Accounting”), the Revised Recommendation and the Principles of Corporate Governance (Section IV: “Disclosure and Transparency”) also include requirements or recommendations on accounting standards and auditing practices. For each of these instruments, the terms used slightly differ. For instance, the Revised Recommendation calls for “internal company controls, with monitoring bodies independent of management”, whereas the Guidelines call for the adoption of “management control systems”, without specifying whether these should be under the supervision of a independent body or of the CEO. The Guidelines specifically mention the need to disclose contributions to political parties, issue which falls outside of the scope of the Revised Recommendation and of the Convention. On the other hand, the Revised Recommendation addresses, in a quite detailed manner, the issue of external audit, which the Guidelines do not cover, except indirectly through references in the Commentary to ICC’s work and in general terms in the Preface.

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Paragraph 9 of Chapter II, General Policies, adds the important element of non-discrimination against “employees who make bona fide reports to management or as appropriate, to the competent public authorities, on practices that contravene the law, the Guidelines or the enterprise’s policies”. This is consistent with the emphasis given by BIAC and TUAC to the need to protect whistle-blowers,

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i.e. the employees who expose corruption in organisations, as these may suffer victimisation. Subsidiaries and other business partners The Negotiating Conference of the 1997 OECD Convention noted that further work was needed on a number of issues, including on the role of foreign subsidiaries in bribery transactions. Members of the Working Group on Bribery share the view of the crucial importance of this subject for the effective implementation of the Convention.12 The Guidelines target a broad application of the principles and recommendations against bribery and extortion, encompassing business partners. Paragraph 10 of Chapter II states that enterprises should “encourage, where practicable, business partners, including suppliers and subs-contractors, to apply principles of corporate conduct compatible with the Guidelines”. The Commentary (paragraph 10) gives further indications on this issue. Table 2 gives a synthetic overview of the anti-bribery contents of the Guidelines, in comparison with the Revised Recommendation and the Convention. II.2. Comparing with other inter-governmental instruments To complement this comparison, it is interesting to review the provisions of other anti-corruption inter-governmental instruments regarding what multinational enterprises should do to prevent bribery. Table 3 shows whether the recommendations made in the Guidelines are echoed by five major non-OECD anti-corruption instruments. Generally speaking, this shows that several of the practices promoted by the Guidelines are recognised world wide as effective anti-corruption prevention practices (see the Annex for details). The standards they promote cannot be considered to only reflect the perspective of OECD countries. In particular, all instruments converge on the importance of accounting practices in the prevention of bribery. II.3. The implementation mechanism of the OECD Guidelines for Multinational Enterprises A policy instrument is much more than a text. Implementation procedures of the Guidelines have been significantly improved. While the Guidelines’ recommendations are addressed to business, governments through their network of National Contact Points (NCP) are responsible for promoting the Guidelines, handling inquiries and helping to resolve issues that arise in specific instances. The Committee on International Investment and Multi-

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GUIDELINES Enterprises should:

CONVENTION Each party shall:

REVISED RECOMMENDATION Member countries should:

Covered

Out of scope

Out of scope

Solicitation of bribes and extortion Covered

Out of scope

Out of scope

Scope Private sector bribery

Bribery of candidates for public office or to political parties

Business partners

Partially covered – further discussion in Covered Contributions should fully comply the Five Issues with public disclosure requirements and should be reported to senior management. Covered Partially covered – further discussion in the Five Issues (subsidiaries)

Measures to be taken by companies Standards of conduct Implied: role of the Guidelines

Internal communication, training and disciplinary procedures

Employment of agents

–

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Promote employee awareness of – and compliance with company policies against bribery and extortion through appropriate dissemination of these policies and through training programmes and disciplinary procedures. Ensure that remuneration of agents – is appropriate and for legitimate services only. Where relevant, a list of agents employed in connection with transactions with public bodies and state-owned enterprises should be kept and made available to competent authorities.

Partially covered – further discussion in the Five Issues

Partially covered – further discussion in the Five Issues (subsidiaries)

Encourage the development and adoption of (…) standards of conduct. –

–


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Table 2. Comparing the Guidelines with the Convention and the Revised Recommendation

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Table 2.

Comparing the Guidelines with the Convention and the Revised Recommendation (cont.) GUIDELINES Enterprises should:

External communication

Enhance the transparency of their – activities in the fight against bribery and extortion. Measures could include making public commitments against bribery and extortion and disclosing management systems the company has adopted in order to honour these commitments. Foster openness and dialogue with the public so as to promote its awareness of and co-operation with the fight against bribery and extortion. Adopt management control – systems that discourage bribery and corrupt practices


Encourage company management to make statements in their annual reports about their internal control mechanisms, including those which contribute to preventing bribery.

Encourage the development and adoption of adequate internal company controls, including standards of conduct. Encourage the creation of monitoring bodies, independent of management, such as audit committees of boards of directors or of supervisory boards.

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Internal control systems

CONVENTION Each party shall:


Accounting practices

CONVENTION Each Party shall:


Adequate accounting Take such measures as may be necessary, within the framework of requirements: its laws and regulations regarding Require companies to maintain adequate records of the sums of the maintenance of books and money received and expended by records, financial statements the company, identifying the disclosures, and accounting and auditing standards, to prohibit the matters in respect of which the receipt and expenditure takes establishment of off-the-books place. Companies should be accounts, the making of off-theprohibited from making off-thebook accounts or inadequately books transactions or keeping offidentified transactions, the the-books accounts. recording of non-existent expenditures, the entry of liabilities Require companies to disclose in with incorrect identification of their their financial statements the full object, as well as the use of false range of material contingent documents, by companies subject liabilities. to those laws and regulations, for Adequately sanction accounting omissions, falsifications and fraud. the purpose of bribing foreign public officials or of hiding such bribery. Adopt financial and tax accounting Provide effective, proportionate and auditing practices that prevent and dissuasive civil, administrative the establishment of “off the books” or criminal penalties for such or secret accounts or the creation of omissions and falsifications in documents which do not properly respect of the books, records, and fairly record the transactions to accounts and financial statements which they relate. of such companies.


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Table 2.

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Table 2.


External audit


–

Independent external audit: Consider whether requirements to submit to external audit are adequate. [professional associations] Maintain adequate standards to ensure the independence of external auditors which permits them to provide an objective assessment of company accounts, financial statements and internal controls. Require the auditor who discovers indications of possible illegal act of bribery to report this discovery to management and, as appropriate, to corporate monitoring bodies. Consider requiring the auditor to report indications of a possible illegal act of bribery to competent authorities. Encourage companies to provide channels for communication by, and protection for, persons not willing to violate professional standards or ethics under instructions or pressure from hierarchical superiors.

– Refrain from discriminatory or disciplinary action against employees who make bona fide reports to management or, as appropriate, to the competent public authorities, on practices that contravene the law, the Guidelines or the enterprise’s policies.

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Whistle-blowing

CONVENTION Each Party shall:

Anti-corruption instruments Issues addressed

Standards of conduct Internal communication training and disciplinary procedures Employment of agents External communication Internal control systems Accounting practices External audit Whistle-blowing Note:

A blank means no.

OECD Guidelines for Multinational Enterprises

Inter-American Convention against Corruption

Council of Europe Council of Europe Criminal Law Civil Law Convention Convention on Corruption on Corruption

SADC Protocol on Corruption

Yes Yes Yes Yes Yes Yes Yes

UN Draft Convention against Corruption

Yes

Yes Yes

Yes Yes

Yes Yes Yes

Yes Yes

Yes Yes Yes


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Table 3. What other inter-governmental anti-corruption instruments recommend companies should do to prevent corruption?

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national Enterprises remains the responsible body for clarifying the meaning of the Guidelines and overseeing their effectiveness. Pressure from peer governments and civil society can also contribute to ensure the effectiveness of the Guidelines. The exercise of peer pressure is much more formalised for the implementation of the Convention and of the Revised Recommendation than for the Guidelines. It is indeed the fundamental principle underlying the mechanism adopted to monitor the 1997 instruments. The network of National Contact Points materialise the commitments made by governments to promote the Guidelines as a model code of conduct. The implementation of the Revised Recommendation is not buttressed by such a public entity in charge of the implementation of this instrument. The fact that NCP are the focus point for several corporate responsibility issues increases their visibility. III. Major Private Initiatives on Corruption Several international private sector associations have developed initiatives on corruption. This section presents some of these initiatives, looking in particular at the correspondences with the norms set by the Guidelines. The review is limited to initiatives that aim primarily at promoting preventing measures to be taken by companies in an anti-corruption perspective, as the Guidelines do. This means that initiatives that advocate policy or institutional changes are out of the scope of this paper.13 III.1. Two major international private sector initiatives There are two major international private sector initiatives that encourage companies to adopt internal measures to prevent corruption: • the ICC Rules of Conduct to Combat Extortion and Bribery; and • the Business Principles for Countering Bribery. First published in 1977, last revised in 1999, the ICC Rules of Conduct to Combat Extortion and Bribery outline the basic measures companies should take to prevent corruption. The Commentary on the Guidelines (paragraph 46) makes reference to ICC’s activity in this field. A Standing Committee on Extortion and Bribery works with the ICC National Committees to promote the use of the Rules of Conduct. This Committee ensures liaison with international organisations active in the anti-corruption field, and stimulates cooperation between governments and the private sector. More recently, Transparency International and Social Accountability International developed the Business Principles for Countering Bribery. These principles are “a tool to assist enterprises to develop effective approaches to countering bribery in all of their activities”. They were designed to “give practical effect to recent initiatives such as the OECD Convention on Combating Bribery of Foreign

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Public Officials in International Business Transactions, the ICC Rules of Conduct to Combat Extortion and Bribery and the anti-bribery provisions of the revised OECD Guidelines for Multinationals”. More detailed than the ICC Rules of Conduct, these Business Principles are meant to be used as a starting point for companies wanting to develop their own anti-bribery systems, or as a benchmark. Table 4 gives an overview of these two initiatives, summarising information the date of their start, their overall purpose and the normative fields they cover. It shows that the recommendations made in the Guidelines are echoed by these private instruments. It is interesting to see also that these instruments introduce elements that were not addressed by the Guidelines. The ICC Rules of Conduct, for instance, recognises that “under current conditions in some parts of the world, an effective programme against extortion and bribery may have to be implemented in stages”. The ICC recommends focusing efforts on ending large-scale bribery involving politicians and senior officials. The Business Principles are also broader than the Guidelines in some respects. For example, they cover facilitation payments and gifts. III.2. Industry initiatives Several international industry associations have developed collective initiatives with an anti-corruption component, which are, according to Mark Pieth, Chair of the OECD Working Group on Bribery, called to further develop in the future.14 The first example is the International Federation of Consulting Engineers (FIDIC), an industry association that represents the international business interests of firms belonging to national member associations of engineering-based consulting companies (see Table 4). To be part of a national member association, firms have to comply with FIDIC’s Code of Ethics and Policy Statements, including that on Integrity. This integrity policy statement aims at reducing corruption in aid-funded public procurement from the private sector side. The FIDIC Integrity Policy Statement introduces the notion of evaluation of the measures adopted to prevent corruption. The Statement also includes a number of recommendations tailored to the specificity of the industry.

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Another example is the group of 12 leading international banks that have developed the Wolfsberg Anti-Money Laundering Principles, a set of global antimoney-laundering guidelines for international private banks (issues covered include: guidelines for client acceptance, practices when identifying unusual or suspicious activities, monitoring, control responsibilities and reporting, etc.). The banks collaborated with a team from Transparency International who invited two international experts to participate, including Prof. Mark Pieth, Chairman of the OECD Working Group on Bribery. These Principles do not deal with the issues of corruption directly, but contribute by raising the risks of exposure for the corrupt, by curbing money laundering.

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Table 4. Three major private initiatives that promote anti-bribery programmes for companies in perspective with the OECD Guidelines for Multinational Enterprises ICC Rules of Conduct to Combat Business Principles for Extortion and Bribery Countering Bribery

Developed by

OECD

Date Broad purpose

2000 To promote responsible business conduct

The International Chamber Transparency International The International of Commerce and Social Accountability Federation of Consulting International Engineers (1977, 1996) 1999 2002 To encourage companies to To help companies develop To provide consulting adopt corruption prevention their anti-bribery systems services that are not biased measures by corruption Standing Committee on Steering Committee FIDIC (disciplinary actions Extortion and Bribery, against members found to National Committees have violated the FIDIC (promotion, information Code of Ethics) sharing, policy dialogue)

Implementation mechanism OECD Committee on (principles) International Investment and Multinational Enterprises and the National Contact Points Issues covered Solicitation of bribes and Yes extortion Standards of conduct Yes Internal communication, Yes training and disciplinary measures Employment of agents Yes External communication Yes Internal control systems Yes Accounting practices Yes External audit Disclosure of contributions Yes to political parties Whistle-blowing Yes Others

Note:

A blank means no.

Yes Yes

Yes Yes

Yes

Yes Yes Yes Yes Yes Yes

Yes Yes Yes Yes

Yes Allows for implementation Broad scope, covering all in stages. business relationships.

FIDIC Code of Ethics and Integrity Policy Statement

Yes Yes

Yes

Evaluation of the Business Integrity Management System, measures specific to the industry.

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Yet another example is the International Association of Oil and Gas Producers (OGP), a worldwide association of oil and gas companies involved in exploration and production. The members include private and state-owned oil and gas companies, national associations and petroleum institutes. OGP recently defined its position on transparency: OGP is “in favour of transparency and opposes corruption in any form. [OGP is] committed to honest, legal and ethical behaviour in all [their] activities, wherever [they] operate”. Furthermore, “OGP is committed to working with multilateral institutions, regulatory bodies and other appropriate parties in their efforts to reduce corruption and maximise transparency”. Leading companies from around the world in the mining and mineral industry set up the International Council on Mining and Metals (ICMM) to develop their industry’s role in the transition to sustainable development. The ICMM adopted a Sustainable Development Charter, which expresses the commitment of its members to principles of sustainable development, in four key areas: Environmental Stewardship; Product Stewardship; Community Responsibility and General Corporate Responsibilities. This Charter includes a commitment to contribute to the fight against corruption: members commit to “adhere to ethical business practices and, in doing so, contribute to the elimination of corruption and bribery, to increased transparency in government-business relations (…)”. III.3. Other private initiatives Other associations have set up anti-corruption initiatives with different purposes. For example, TRACE (Transparent Agents and Contracting Entities) is an international non-profit membership organisation working to reduce corruption in transactions involving business intermediaries. It provides a mechanism that helps select business intermediaries who commit voluntarily, publicly and decisively to greater transparency and ethical business practices. TRACE prepares extensive background reports on member intermediaries to the highest standard internationally and makes them available to companies requesting them. It also helps provides anti-corruption training to intermediaries on their own anti-bribery laws and on international standards. This initiative contributes to the creation of standards for the use of agents.

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Another example is UNICORN, which is a trade union anti-corruption network. Its overall mission is to mobilise workers to share information and coordinate action to combat international corruption. It is a joint initiative of TUAC, the International Confederation of Free Trade Unions and Public Services International. UNICORN is undertaking empirical research into the corrupt practices of multinational enterprises, particularly in the context of privatisation and public procurement. It is also undertaking policy research on a range of initiatives aimed at detecting and deterring international bribery.

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Annex

Corruption Prevention Measures Recommended to Companies by Five Major International Anti-corruption Instruments

The Inter-American Convention against Corruption: Article III: Preventive measures, paragraph 10: State parties have agreed “to consider the applicability of measures within their own institutional systems to create, maintain and strengthen: (…) 10. Deterrents to the bribery of domestic and foreign government officials, such as mechanisms to ensure that publicly held companies and other types of associations maintain books and records which, in reasonable detail, accurately reflect the acquisition and disposition of assets, and have sufficient internal accounting controls to enable their officers to detect corrupt acts.” The Criminal Law Convention on Corruption: Article 14: Account offences: “Each Party shall adopt such legislative and other measures as may be necessary to establish as offences liable to criminal or other sanctions under its domestic law the following acts or omissions, when committed intentionally, in order to commit, conceal or disguise the offences referred to in Articles 2 to 12, to the extent the Party has not made a reservation or a declaration: a) creating or using an invoice or any other accounting document or record containing false or incomplete information; b) unlawfully omitting to make record of a payment. Article 22: Protection of collaborators of justice and witnesses: “Each Party shall adopt such measures as may be necessary to provide effective and appropriate protection for: a) those who report the criminal offences established in accordance with Articles 2 to 14 or otherwise co-operate with the investigating or prosecuting authorities; b) witnesses who give testimony concerning these offences.” The Civil Law Convention on Corruption: Article 9: Protection of employees: “Each Party shall provide in its internal law for appropriate protection against any unjustified sanction for employees who have reasonable grounds to suspect corruption and who report in good faith their suspicion to responsible persons or authorities.”

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Article 10: Accounts and audits: “1. Each Party shall, in its internal law, take any necessary measures for the annual accounts of companies to be drawn up clearly and give a true and fair view of the company’s financial position. 2. With a view to preventing acts of corruption, each Party shall provide in its internal law for auditors to confirm that the annual accounts present a true and fair view of the company’s financial position.” The Southern African Development Community Protocol on Corruption Article 4: Preventative measures: “For the purposes set forth in Article 2 of this Protocol, each State Party undertakes to adopt measures, which will create, maintain and strengthen: (…) 1.h) deterrents to the bribery of domestic public officials, and officials of foreign States, such as mechanisms to ensure that publicly held companies and other types of associations maintain books and records which, in reasonable details, accurately reflect the acquisition and disposition of assets, and have sufficient internal accounting controls to enable the law enforcement agencies to detect acts of corruption.” The United Nations Convention against Corruption (draft of November 2002):

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Article 10: Funding of political parties: “Each State Party shall adopt, maintain and strengthen measures and regulations concerning the funding of political parties. Such measures and regulations shall serve: (…) d) To incorporate the concept of transparency into funding of political parties by requiring declaration of donations exceeding a specified limit.” Article 11: Private sector: “Each State Party shall endeavour, in accordance with the fundamental principles of its domestic law, to prevent corruption involving the private sector through measures that focus, inter alia , on: (…) b) Promoting the development of standards and procedures designed to safeguard the integrity of relevant private entities, including codes of conduct for the correct, honourable and proper performance of the activities of business and all relevant professions and the prevention of conflicts of interest; (…) d) Promoting transparency among private entities, including, where appropriate, measures regarding the identity of legal and natural persons involved in the establishment and management of corporate entities and of holders of the capital and shares of corporate entities.” Article 12: Accounting standards for the private sector: “1. In order to prevent corruption effectively, each State Party shall take the necessary measures, in accordance with its domestic laws and regulations regarding the maintenance of books and records, financial statement disclosures and accounting and auditing standards, to prohibit the following acts carried out for the purpose of committing any of the offences established in articles […] of this Convention: a) The establishment of off-the-books accounts; b) The making of off-the-books or inadequately identified transactions; c) The recording of non-existent expenditure; d) The entry of liabilities with incorrect identification of their objects; and e) The use of false documents.

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2. Each State Party shall establish effective, proportionate and dissuasive civil, administrative or criminal penalties for the omissions and falsifications referred to in paragraph 1 of this article. 3. Each State Party shall take such measures as may be necessary, in accordance with the fundamental principles of its domestic legal system, to ensure: a) That private entities, taking into account their size, have sufficient internal accounting controls to assist in preventing and detecting acts of corruption; and b) The accounts and required financial statements of such private entities are subjected to appropriate auditing and certification procedures.”

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Notes

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1. Cf. paragraph 9 in the commentaries on the Convention. 2. The Convention encompasses the three previous instruments. State Parties to the Convention commit to implement the Revised Recommendation (cf. Commentaries on the Convention, Article 13). Besides, the Revised Recommendation makes reference to both the Recommendation on Tax Deductibility and to the Recommendation on AntiCorruption in Aid-Funded Procurement. Doing so, it extends their membership to the signatories of the Convention. 3. This instrument will be considered for approval by the OECD Expert Group on Managing Conflicts of Interest early April 2003. 4. To be precise, these two recommendations are included in the Revised Recommendation. 5. This paragraph is inspired by John T. Scholz (1997) “Enforcement Policy and Corporate Misconduct: The Changing Perspective of Deterrence Theory”, in Law and Contemporary Problems, n. 127. 6. OECD (2001) Corporate Responsibility: Private Initiatives and Public Goals explores the relationship between deterrence and other determinants of companies’ decisions to comply with the law or with expectations for business behavior that might be written down in law books. 7. Theoretically both domestic and international public bribery, as the other party involved in the bribery act can be a public official, a business person or a political party official, from a foreign country or from the same country as the enterprise’s country of origin. 8. Links can be made between the following paragraphs: II. 5 and the chapeau of Chapter VI; II.6 and VI.5; II.7 and VI.3 and VI.5; II.8 and VI.4; II.11 and VI.6. 9. The solicitation of bribes is the act of asking or enticing another to commit bribery. It becomes extortion when this demand is accompanied by threats that endanger the personal integrity or the life of the private actors involved. The threat to refuse a due investment license or to tear down a plant’s buildings for instance cannot be considered as creating a situation of extortion. 10. See DAFFE/IME/BR(99)15 and DAFFE/IME/BR(99) 34. 11. Cf. December 1999 Statement of the BIAC MNEs Committee – Task Force on Bribery and Corruption: www.biac.org. 12. See DAFFE/IME/BR(98)13/REV1. 13. For more information on these two approaches of business action, see I. Hors (2000) “Fighting Corruption in Developing Countries and Emerging Economies: The Role of the Private Sector”, OECD Development Centre. 14. See Gemma Aiolfi and Mark Pieth (March 2002) “How to Make a Convention Work: the OECD Recommendation and Convention on Bribery as an Example of a New Horizon in International Law”, DAFFE/IME/BR/WD(2002)4.

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Appendix I

Declaration on International Investment and Multinational Enterprises 27 June 2000 ADHERING GOVERNMENTS1 CONSIDERING: • That international investment is of major importance to the world economy, and has considerably contributed to the development of their countries; • That multinational enterprises play an important role in this investment process; • That international co-operation can improve the foreign investment climate, encourage the positive contribution which multinational enterprises can make to economic, social and environmental progress, and minimise and resolve difficulties which may arise from their operations; • That the benefits of international co-operation are enhanced by addressing issues relating to international investment and multinational enterprises through a balanced framework of inter-related instruments; DECLARE: Guidelines for Multinational Enterprises

I.

National Treatment

II.1. That adhering governments should, consistent with their needs to maintain public order, to protect their essential security interests and to fulfil commitments relating to international peace and security, accord to enterprises operating in their territories and owned or controlled directly or indirectly by nationals of another adhering government (hereinafter referred to as “Foreign-Controlled Enterprises”) treatment under their laws, regulations and administrative practices, consistent with international law and no less favourable than that accorded in like situations to domestic enterprises (hereinafter referred to as “National Treatment”); 2.

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That they jointly recommend to multinational enterprises operating in or from their territories the observance of the Guidelines, set forth in Annex 1 hereto2, having regard to the considerations and understandings that are set out in the Preface and are an integral part of them;”

That adhering governments will consider applying “National Treatment” in respect of countries other than adhering governments;

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3.

That adhering governments will endeavour to ensure that their territorial subdivisions apply “National Treatment”;

4.

That this Declaration does not deal with the right of adhering governments to regulate the entry of foreign investment or the conditions of establishment of foreign enterprises;

Conflicting Requirements

III.

That they will co-operate with a view to avoiding or minimising the imposition of conflicting requirements on multinational enterprises and that they will take into account the general considerations and practical approaches as set forth in Annex 2 hereto3.

International Investment Incentives and Disincentives

IV.1. That they recognise the need to strengthen their cooperation in the field of international direct investment; 2.

That they thus recognise the need to give due weight to the interests of adhering governments affected by specific laws, regulations and administrative practices in this field (hereinafter called “measures”) providing official incentives and disincentives to international direct investment;

3.

That adhering governments will endeavour to make such measures as transparent as possible, so that their importance and purpose can be ascertained and that information on them can be readily available;

Consultation Procedures V.

That they are prepared to consult one another on the above matters in conformity with the relevant Decisions of the Council;

Review

That they will review the above matters periodically with a view to improving the effectiveness of international economic co-operation among adhering governments on issues relating to international investment and multinational enterprises.

VI.

Notes 1. As at 27 June 2000 adhering governments are those of all OECD Members, as well as Argentina, Brazil, Chile and the Slovak Republic. The European Community has been invited to associate itself with the section on National Treatment on matters falling within its competence. 2. The text of the Guidelines for Multinational Enterprises is reproduced in Annex II of this publication.

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3. The text of General Considerations and Practical Approaches concerning Conflicting Requirements Imposed on Multinational Enterprises is available from the OECD Website www.oecd.org/daf/investment/.

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Appendix II

The OECD Guidelines for Multinational Enterprises: Text and Implementation Procedures Text Preface 1. The OECD Guidelines for Multinational Enterprises (the Guidelines) are recommendations addressed by governments to multinational enterprises. They provide voluntary principles and standards for responsible business conduct consistent with applicable laws. The Guidelines aim to ensure that the operations of these enterprises are in harmony with government policies, to strengthen the basis of mutual confidence between enterprises and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development made by multinational enterprises. The Guidelines are part of the OECD Declaration on International Investment and Multinational Enterprises the other elements of which relate to national treatment, conflicting requirements on enterprises, and international investment incentives and disincentives. 2. International business has experienced far-reaching structural change and the Guidelines themselves have evolved to reflect these changes. With the rise of service and knowledgeintensive industries, service and technology enterprises have entered the international marketplace. Large enterprises still account for a major share of international investment, and there is a trend toward large-scale international mergers. At the same time, foreign investment by small- and medium-sized enterprises has also increased and these enterprises now play a significant role on the international scene. Multinational enterprises, like their domestic counterparts, have evolved to encompass a broader range of business arrangements and organisational forms. Strategic alliances and closer relations with suppliers and contractors tend to blur the boundaries of the enterprise. 3. The rapid evolution in the structure of multinational enterprises is also reflected in their operations in the developing world, where foreign direct investment has grown rapidly. In developing countries, multinational enterprises have diversified beyond primary production and extractive industries into manufacturing, assembly, domestic market development and services. 4. The activities of multinational enterprises, through international trade and investment, have strengthened and deepened the ties that join OECD economies to each other and to the rest of the world. These activities bring substantial benefits to home and host countries. These benefits accrue when multinational enterprises supply the products and services that consumers want to buy at competitive prices and when they provide fair returns to suppliers of capital. Their trade and investment activities contribute to the efficient use of capital, technology and human and natural resources. They facilitate the transfer of technology

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among the regions of the world and the development of technologies that reflect local conditions. Through both formal training and on-the-job learning enterprises also promote the development of human capital in host countries. 5. The nature, scope and speed of economic changes have presented new strategic challenges for enterprises and their stakeholders. Multinational enterprises have the opportunity to implement best practice policies for sustainable development that seek to ensure coherence between social, economic and environmental objectives. The ability of multinational enterprises to promote sustainable development is greatly enhanced when trade and investment are conducted in a context of open, competitive and appropriately regulated markets. 6. Many multinational enterprises have demonstrated that respect for high standards of business conduct can enhance growth. Today’s competitive forces are intense and multinational enterprises face a variety of legal, social and regulatory settings. In this context, some enterprises may be tempted to neglect appropriate standards and principles of conduct in an attempt to gain undue competitive advantage. Such practices by the few may call into question the reputation of the many and may give rise to public concerns. 7. Many enterprises have responded to these public concerns by developing internal programmes, guidance and management systems that underpin their commitment to good corporate citizenship, good practices and good business and employee conduct. Some of them have called upon consulting, auditing and certification services, contributing to the accumulation of expertise in these areas. These efforts have also promoted social dialogue on what constitutes good business conduct. The Guidelines clarify the shared expectations for business conduct of the governments adhering to them and provide a point of reference for enterprises. Thus, the Guidelines both complement and reinforce private efforts to define and implement responsible business conduct. 8. Governments are co-operating with each other and with other actors to strengthen the international legal and policy framework in which business is conducted. The post-war period has seen the development of this framework, starting with the adoption in 1948 of the Universal Declaration of Human Rights. Recent instruments include the ILO Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development and Agenda 21 and the Copenhagen Declaration for Social Development. 9. The OECD has also been contributing to the international policy framework. Recent developments include the adoption of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and of the OECD Principles of Corporate Governance, the OECD Guidelines for Consumer Protection in the Context of Electronic Commerce, and ongoing work on the OECD Guidelines on Transfer Pricing for Multinational Enterprises and Tax Administrations.

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10. The common aim of the governments adhering to the Guidelines is to encourage the positive contributions that multinational enterprises can make to economic, environmental and social progress and to minimise the difficulties to which their various operations may give rise. In working towards this goal, governments find themselves in partnership with the many businesses, trade unions and other non-governmental organisations that are working in their own ways toward the same end. Governments can help by providing effective domestic policy frameworks that include stable macroeconomic policy, non-discriminatory treatment of firms, appropriate regulation and prudential supervision, an impartial system of courts and law enforcement and efficient and honest public administration. Governments can also help by maintaining and promoting appropriate standards and policies in support of sustainable development and by engaging in ongoing reforms to ensure that public sector activity is effi-

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cient and effective. Governments adhering to the Guidelines are committed to continual improvement of both domestic and international policies with a view to improving the welfare and living standards of all people. I.

Concepts and Principles

1. The Guidelines are recommendations jointly addressed by governments to multinational enterprises. They provide principles and standards of good practice consistent with applicable laws. Observance of the Guidelines by enterprises is voluntary and not legally enforceable. 2. Since the operations of multinational enterprises extend throughout the world, international co-operation in this field should extend to all countries. Governments adhering to the Guidelines encourage the enterprises operating on their territories to observe the Guidelines wherever they operate, while taking into account the particular circumstances of each host country. 3. A precise definition of multinational enterprises is not required for the purposes of the Guidelines. These usually comprise companies or other entities established in more than one country and so linked that they may co-ordinate their operations in various ways. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another. Ownership may be private, state or mixed. The Guidelines are addressed to all the entities within the multinational enterprise (parent companies and/or local entities). According to the actual distribution of responsibilities among them, the different entities are expected to co-operate and to assist one another to facilitate observance of the Guidelines. 4. The Guidelines are not aimed at introducing differences of treatment between multinational and domestic enterprises; they reflect good practice for all. Accordingly, multinational and domestic enterprises are subject to the same expectations in respect of their conduct wherever the Guidelines are relevant to both. 5. Governments wish to encourage the widest possible observance of the Guidelines. While it is acknowledged that small- and medium-sized enterprises may not have the same capacities as larger enterprises, governments adhering to the Guidelines nevertheless encourage them to observe the Guidelines recommendations to the fullest extent possible. 6. Governments adhering to the Guidelines should not use them for protectionist purposes nor use them in a way that calls into question the comparative advantage of any country where multinational enterprises invest. 7. Governments have the right to prescribe the conditions under which multinational enterprises operate within their jurisdictions, subject to international law. The entities of a multinational enterprise located in various countries are subject to the laws applicable in these countries. When multinational enterprises are subject to conflicting requirements by adhering countries, the governments concerned will co-operate in good faith with a view to resolving problems that may arise. 8. Governments adhering to the Guidelines set them forth with the understanding that they will fulfil their responsibilities to treat enterprises equitably and in accordance with international law and with their contractual obligations. 9. The use of appropriate international dispute settlement mechanisms, including arbitration, is encouraged as a means of facilitating the resolution of legal problems arising between enterprises and host country governments.

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10. Governments adhering to the Guidelines will promote them and encourage their use. They will establish National Contact Points that promote the Guidelines and act as a forum for discussion of all matters relating to the Guidelines. The adhering Governments will also participate in appropriate review and consultation procedures to address issues concerning interpretation of the Guidelines in a changing world. II. General Policies Enterprises should take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders. In this regard, enterprises should: 1. Contribute to economic, social and environmental progress with a view to achieving sustainable development. 2. Respect the human rights of those affected by their activities consistent with the host government’s international obligations and commitments. 3. Encourage local capacity building through close co-operation with the local community, including business interests, as well as developing the enterprise’s activities in domestic and foreign markets, consistent with the need for sound commercial practice. 4. Encourage human capital formation, in particular by creating employment opportunities and facilitating training opportunities for employees. 5. Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to environmental, health, safety, labour, taxation, financial incentives, or other issues. 6. Support and uphold good corporate governance principles and develop and apply good corporate governance practices. 7. Develop and apply effective self-regulatory practices and management systems that foster a relationship of confidence and mutual trust between enterprises and the societies in which they operate. 8. Promote employee awareness of, and compliance with, company policies through appropriate dissemination of these policies, including through training programmes. 9. Refrain from discriminatory or disciplinary action against employees who make bona fide reports to management or, as appropriate, to the competent public authorities, on practices that contravene the law, the Guidelines or the enterprise’s policies. 10. Encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the Guidelines. 11. Abstain from any improper involvement in local political activities. III. Disclosure

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1. Enterprises should ensure that timely, regular, reliable and relevant information is disclosed regarding their activities, structure, financial situation and performance. This information should be disclosed for the enterprise as a whole and, where appropriate, along business lines or geographic areas. Disclosure policies of enterprises should be tailored to the nature, size and location of the enterprise, with due regard taken of costs, business confidentiality and other competitive concerns. 2. Enterprises should apply high quality standards for disclosure, accounting, and audit. Enterprises are also encouraged to apply high quality standards for non-financial information including

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Appendix II

environmental and social reporting where they exist. The standards or policies under which both financial and non-financial information are compiled and published should be reported. 3. Enterprises should disclose basic information showing their name, location, and structure, the name, address and telephone number of the parent enterprise and its main affiliates, its percentage ownership, direct and indirect in these affiliates, including shareholdings between them. 4.

Enterprises should also disclose material information on: 1. The financial and operating results of the company; 2. Company objectives; 3. Major share ownership and voting rights; 4. Members of the board and key executives, and their remuneration; 5. Material foreseeable risk factors; 6. Material issues regarding employees and other stakeholders; 7. Governance structures and policies.

5.

Enterprises are encouraged to communicate additional information that could include: a) Value statements or statements of business conduct intended for public disclosure including information on the social, ethical and environmental policies of the enterprise and other codes of conduct to which the company subscribes. In addition, the date of adoption, the countries and entities to which such statements apply and its performance in relation to these statements may be communicated; b) Information on systems for managing risks and complying with laws, and on statements or codes of business conduct; c) Information on relationships with employees and other stakeholders.

IV. Employment and Industrial Relations Enterprises should, within the framework of applicable law, regulations and prevailing labour relations and employment practices: 1.

a) Respect the right of their employees to be represented by trade unions and other bona fide representatives of employees, and engage in constructive negotiations, either individually or through employers’ associations, with such representatives with a view to reaching agreements on employment conditions; b) Contribute to the effective abolition of child labour; c) Contribute to the elimination of all forms of forced or compulsory labour; d) Not discriminate against their employees with respect to employment or occupation on such grounds as race, colour, sex, religion, political opinion, national extraction or social origin, unless selectivity concerning employee characteristics furthers established governmental policies which specifically promote greater equality of employment opportunity or relates to the inherent requirements of a job.

2.

a) Provide facilities to employee representatives as may be necessary to assist in the development of effective collective agreements; b) Provide information to employee representatives which is needed for meaningful negotiations on conditions of employment;

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3.

4.

5.

6.

7.

8.

V.

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c) Promote consultation and co-operation between employers and employees and their representatives on matters of mutual concern. Provide information to employees and their representatives which enables them to obtain a true and fair view of the performance of the entity or, where appropriate, the enterprise as a whole. a) Observe standards of employment and industrial relations not less favourable than those observed by comparable employers in the host country; b) Take adequate steps to ensure occupational health and safety in their operations. In their operations, to the greatest extent practicable, employ local personnel and provide training with a view to improving skill levels, in co-operation with employee representatives and, where appropriate, relevant governmental authorities. In considering changes in their operations which would have major effects upon the livelihood of their employees, in particular in the case of the closure of an entity involving collective lay-offs or dismissals, provide reasonable notice of such changes to representatives of their employees, and, where appropriate, to the relevant governmental authorities, and co-operate with the employee representatives and appropriate governmental authorities so as to mitigate to the maximum extent practicable adverse effects. In light of the specific circumstances of each case, it would be appropriate if management were able to give such notice prior to the final decision being taken. Other means may also be employed to provide meaningful co-operation to mitigate the effects of such decisions. In the context of bona fide negotiations with representatives of employees on conditions of employment, or while employees are exercising a right to organise, not threaten to transfer the whole or part of an operating unit from the country concerned nor transfer employees from the enterprises’ component entities in other countries in order to influence unfairly those negotiations or to hinder the exercise of a right to organise. Enable authorised representatives of their employees to negotiate on collective bargaining or labour-management relations issues and allow the parties to consult on matters of mutual concern with representatives of management who are authorised to take decisions on these matters. Environment

Enterprises should, within the framework of laws, regulations and administrative practices in the countries in which they operate, and in consideration of relevant international agreements, principles, objectives, and standards, take due account of the need to protect the environment, public health and safety, and generally to conduct their activities in a manner contributing to the wider goal of sustainable development. In particular, enterprises should: 1. Establish and maintain a system of environmental management appropriate to the enterprise, including: a) Collection and evaluation of adequate and timely information regarding the environmental, health, and safety impacts of their activities; b) Establishment of measurable objectives and, where appropriate, targets for improved environmental performance, including periodically reviewing the continuing relevance of these objectives; and c) Regular monitoring and verification of progress toward environmental, health, and safety objectives or targets.

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2.

Taking into account concerns about cost, business confidentiality, and the protection of intellectual property rights: a) Provide the public and employees with adequate and timely information on the potential environment, health and safety impacts of the activities of the enterprise, which could include reporting on progress in improving environmental performance; and b) Engage in adequate and timely communication and consultation with the communities directly affected by the environmental, health and safety policies of the enterprise and by their implementation.

3.

Assess, and address in decision-making, the foreseeable environmental, health, and safety-related impacts associated with the processes, goods and services of the enterprise over their full life cycle. Where these proposed activities may have significant environmental, health, or safety impacts, and where they are subject to a decision of a competent authority, prepare an appropriate environmental impact assessment.

4.

Consistent with the scientific and technical understanding of the risks, where there are threats of serious damage to the environment, taking also into account human health and safety, not use the lack of full scientific certainty as a reason for postponing costeffective measures to prevent or minimise such damage.

5.

Maintain contingency plans for preventing, mitigating, and controlling serious environmental and health damage from their operations, including accidents and emergencies; and mechanisms for immediate reporting to the competent authorities.

6.

Continually seek to improve corporate environmental performance, by encouraging, where appropriate, such activities as: a) Adoption of technologies and operating procedures in all parts of the enterprise that reflect standards concerning environmental performance in the best performing part of the enterprise; b) Development and provision of products or services that have no undue environmental impacts; are safe in their intended use; are efficient in their consumption of energy and natural resources; can be reused, recycled, or disposed of safely; c) Promoting higher levels of awareness among customers of the environmental implications of using the products and services of the enterprise; and d) Research on ways of improving the environmental performance of the enterprise over the longer term.

7.

Provide adequate education and training to employees in environmental health and safety matters, including the handling of hazardous materials and the prevention of environmental accidents, as well as more general environmental management areas, such as environmental impact assessment procedures, public relations, and environmental technologies.

8.

Contribute to the development of environmentally meaningful and economically efficient public policy, for example, by means of partnerships or initiatives that will enhance environmental awareness and protection.

VI. Combating Bribery Enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage. Nor should

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enterprises be solicited or expected to render a bribe or other undue advantage. In particular, enterprises should: 1.

Not offer, nor give in to demands, to pay public officials or the employees of business partners any portion of a contract payment. They should not use subcontracts, purchase orders or consulting agreements as means of channelling payments to public officials, to employees of business partners or to their relatives or business associates.

2.

Ensure that remuneration of agents is appropriate and for legitimate services only. Where relevant, a list of agents employed in connection with transactions with public bodies and state-owned enterprises should be kept and made available to competent authorities.

3.

Enhance the transparency of their activities in the fight against bribery and extortion. Measures could include making public commitments against bribery and extortion and disclosing the management systems the company has adopted in order to honour these commitments. The enterprise should also foster openness and dialogue with the public so as to promote its awareness of and co-operation with the fight against bribery and extortion.

4.

Promote employee awareness of and compliance with company policies against bribery and extortion through appropriate dissemination of these policies and through training programmes and disciplinary procedures.

5.

Adopt management control systems that discourage bribery and corrupt practices, and adopt financial and tax accounting and auditing practices that prevent the establishment of “off the books” or secret accounts or the creation of documents which do not properly and fairly record the transactions to which they relate.

6.

Not make illegal contributions to candidates for public office or to political parties or to other political organisations. Contributions should fully comply with public disclosure requirements and should be reported to senior management.

VII. Consumer Interests When dealing with consumers, enterprises should act in accordance with fair business, marketing and advertising practices and should take all reasonable steps to ensure the safety and quality of the goods or services they provide. In particular, they should:

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1.

Ensure that the goods or services they provide meet all agreed or legally required standards for consumer health and safety, including health warnings and product safety and information labels.

2.

As appropriate to the goods or services, provide accurate and clear information regarding their content, safe use, maintenance, storage, and disposal sufficient to enable consumers to make informed decisions.

3.

Provide transparent and effective procedures that address consumer complaints and contribute to fair and timely resolution of consumer disputes without undue cost or burden.

4.

Not make representations or omissions, nor engage in any other practices, that are deceptive, misleading, fraudulent, or unfair.

5.

Respect consumer privacy and provide protection for personal data.

6.

Co-operate fully and in a transparent manner with public authorities in the prevention or removal of serious threats to public health and safety deriving from the consumption or use of their products.

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Appendix II

VIII. Science and Technology Enterprises should: 1. Endeavour to ensure that their activities are compatible with the science and technology (S&T) policies and plans of the countries in which they operate and as appropriate contribute to the development of local and national innovative capacity. 2. Adopt, where practicable in the course of their business activities, practices that permit the transfer and rapid diffusion of technologies and know-how, with due regard to the protection of intellectual property rights. 3. When appropriate, perform science and technology development work in host countries to address local market needs, as well as employ host country personnel in an S&T capacity and encourage their training, taking into account commercial needs. 4. When granting licenses for the use of intellectual property rights or when otherwise transferring technology, do so on reasonable terms and conditions and in a manner that contributes to the long term development prospects of the host country. 5. Where relevant to commercial objectives, develop ties with local universities, public research institutions, and participate in co-operative research projects with local industry or industry associations. IX. Competition Enterprises should, within the framework of applicable laws and regulations, conduct their activities in a competitive manner. In particular, enterprises should: 1. Refrain from entering into or carrying out anti-competitive agreements among competitors: a) To fix prices; b) To make rigged bids (collusive tenders); c) To establish output restrictions or quotas; or d) To share or divide markets by allocating customers, suppliers, territories or lines of commerce. 2. Conduct all of their activities in a manner consistent with all applicable competition laws, taking into account the applicability of the competition laws of jurisdictions whose economies would be likely to be harmed by anti-competitive activity on their part. 3. Co-operate with the competition authorities of such jurisdictions by, among other things and subject to applicable law and appropriate safeguards, providing as prompt and complete responses as practicable to requests for information. 4. Promote employee awareness of the importance of compliance with all applicable competition laws and policies. X. Taxation It is important that enterprises contribute to the public finances of host countries by making timely payment of their tax liabilities. In particular, enterprises should comply with the tax laws and regulations in all countries in which they operate and should exert every effort to act in accordance with both the letter and spirit of those laws and regulations. This would include such measures as providing to the relevant authorities the information necessary for the correct determination of taxes to be assessed in connection with their operations and conforming transfer pricing practices to the arm’s length principle.

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Implementation Procedures Decision of the OECD Council on the OECD Guidelines for Multinational Enterprises June 2000 THE COUNCIL, Having regard to the Convention on the Organisation for Economic Co-operation and Development of 14th December 1960; Having regard to the OECD Declaration on International Investment and Multinational Enterprises (the “Declaration”), in which the Governments of adhering countries (“adhering countries”) jointly recommend to multinational enterprises operating in or from their territories the observance of Guidelines for Multinational Enterprises (the “Guidelines”); Recognising that, since operations of multinational enterprises extend throughout the world, international co-operation on issues relating to the Declaration should extend to all countries; Having regard to the Terms of Reference of the Committee on International Investment and Multinational Enterprises, in particular with respect to its responsibilities for the Declaration [C(84)171(Final), renewed in C/M(95)21]; Considering the Report on the First Review of the 1976 Declaration [C(79)102(Final)], the Report on the Second Review of the Declaration [C/MIN(84)5(Final)], the Report on the 1991 Review of the Declaration [DAFFE/IME(91)23], and the Report on the 2000 Review of the Guidelines [C(2000)96]; Having regard to the Second Revised Decision of the Council of June 1984 [C(84)90], amended June 1991 [C/MIN(91)7/ANN1]; Considering it desirable to enhance procedures by which consultations may take place on matters covered by these Guidelines and to promote the effectiveness of the Guidelines; On the proposal of the Committee on International Investment and Multinational Enterprises: DECIDES: To repeal the Second Revised Decision of the Council of June 1984 [C(84)90], amended June 1991 [C/MIN(91)7/ANN1], and replace it with the following:

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I.


1.

Adhering countries shall set up National Contact Points for undertaking promotional activities, handling inquiries and for discussions with the parties concerned on all matters covered by the Guidelines so that they can contribute to the solution of problems

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which may arise in this connection, taking due account of the attached procedural guidance. The business community, employee organisations, and other interested parties shall be informed of the availability of such facilities. 2.

National Contact Points in different countries shall co-operate if such need arises, on any matter related to the Guidelines relevant to their activities. As a general procedure, discussions at the national level should be initiated before contacts with other National Contact Points are undertaken.

3.

National Contact Points shall meet annually to share experiences and report to the Committee on International Investment and Multinational Enterprises.

II. The Committee on International Investment and Multinational Enterprises 1.

The Committee on International Investment and Multinational Enterprises (“CIME” or “the Committee”) shall periodically or at the request of an adhering country hold exchanges of views on matters covered by the Guidelines and the experience gained in their application.

2.

The Committee shall periodically invite the Business and Industry Advisory Committee to the OECD (BIAC), and the Trade Union Advisory Committee to the OECD (TUAC) (the “advisory bodies”), as well as other non-governmental organisations to express their views on matters covered by the Guidelines. In addition, exchanges of views with the advisory bodies on these matters may be held at their request.

3.

The Committee may decide to hold exchanges of views on matters covered by the Guidelines with representatives of non-adhering countries.

4.

The Committee shall be responsible for clarification of the Guidelines. Clarification will be provided as required. If it so wishes, an individual enterprise will be given the opportunity to express its views either orally or in writing on issues concerning the Guidelines involving its interests. The Committee shall not reach conclusions on the conduct of individual enterprises.

5.

The Committee shall hold exchanges of views on the activities of National Contact Points with a view to enhancing the effectiveness of the Guidelines.

6.

In fulfilling its responsibilities for the effective functioning of the Guidelines, the Committee shall take due account of the attached procedural guidance.

7.

The Committee shall periodically report to the Council on matters covered by the Guidelines. In its reports, the Committee shall take account of reports by National Contact Points, the views expressed by the advisory bodies, and the views of other non-governmental organisations and non-adhering countries as appropriate.

III. Review of the Decision This Decision shall be periodically reviewed. The Committee shall make proposals for this purpose. 193

© OECD 2003


Procedural Guidance I.


The role of National Contact Points (NCP) is to further the effectiveness of the Guidelines. NCPs will operate in accordance with core criteria of visibility, accessibility, transparency and accountability to further the objective of functional equivalence. A.

Institutional Arrangements

Consistent with the objective of functional equivalence, adhering countries have flexibility in organising their NCPs, seeking the active support of social partners, including the business community, employee organisations, and other interested parties, which includes nongovernmental organisations. Accordingly, the National Contact Point: 1.

May be a senior government official or a government office headed by a senior official. Alternatively, the National Contact Point may be organised as a co-operative body, including representatives of other government agencies. Representatives of the business community, employee organisations and other interested parties may also be included.

2.

Will develop and maintain relations with representatives of the business community, employee organisations and other interested parties that are able to contribute to the effective functioning of the Guidelines.

B. Information and Promotion National Contact Points will: 1.

Make the Guidelines known and available by appropriate means, including through online information, and in national languages. Prospective investors (inward and outward) should be informed about the Guidelines, as appropriate.

2.

Raise awareness of the Guidelines, including through co-operation, as appropriate, with the business community, employee organisations, other non-governmental organisations, and the interested public.

3.

Respond to enquiries about the Guidelines from: a) Other National Contact Points; b) The business community, employee organisations, other non-governmental organisations and the public; and

194

c) Governments of non-adhering countries.

© OECD 2003

Appendix II

C.

Implementation in Specific Instances

The NCP will contribute to the resolution of issues that arise relating to implementation of the Guidelines in specific instances. The NCP will offer a forum for discussion and assist the business community, employee organisations and other parties concerned to deal with the issues raised in an efficient and timely manner and in accordance with applicable law. In providing this assistance, the NCP will: 1.

Make an initial assessment of whether the issues raised merit further examination and respond to the party or parties raising them.

2.

Where the issues raised merit further examination, offer good offices to help the parties involved to resolve the issues. For this purpose, the NCP will consult with these parties and where relevant: a) Seek advice from relevant authorities, and/or representatives of the business community, employee organisations, other non-governmental organisations, and relevant experts; b) Consult the National Contact Point in the other country or countries concerned; c) Seek the guidance of the CIME if it has doubt about the interpretation of the Guidelines in particular circumstances; d) Offer, and with the agreement of the parties involved, facilitate access to consensual and non-adversarial means, such as conciliation or mediation, to assist in dealing with the issues.

3.

If the parties involved do not reach agreement on the issues raised, issue a statement, and make recommendations as appropriate, on the implementation of the Guidelines.

4.

a) In order to facilitate resolution of the issues raised, take appropriate steps to protect sensitive business and other information. While the procedures under paragraph 2 are underway, confidentiality of the proceedings will be maintained. At the conclusion of the procedures, if the parties involved have not agreed on a resolution of the issues raised, they are free to communicate about and discuss these issues. However, information and views provided during the proceedings by another party involved will remain confidential, unless that other party agrees to their disclosure. b) After consultation with the parties involved, make publicly available the results of these procedures unless preserving confidentiality would be in the best interests of effective implementation of the Guidelines.

5.

If issues arise in non-adhering countries, take steps to develop an understanding of the issues involved, and follow these procedures where relevant and practicable.

D. Reporting 1.

Each National Contact Point will report annually to the Committee.

2.

Reports should contain information on the nature and results of the activities of the National Contact Point, including implementation activities in specific instances.

© OECD 2003

195


II. Committee on International Investment and Multinational Enterprises 1. 2.

3.

4.

The Committee will discharge its responsibilities in an efficient and timely manner. The Committee will consider requests from NCPs for assistance in carrying out their activities, including in the event of doubt about the interpretation of the Guidelines in particular circumstances. The Committee will: a) Consider the reports of NCPs. b) Consider a substantiated submission by an adhering country or an advisory body on whether an NCP is fulfilling its responsibilities with regard to its handling of specific instances. c) Consider issuing a clarification where an adhering country or an advisory body makes a substantiated submission on whether an NCP has correctly interpreted the Guidelines in specific instances. d) Make recommendations, as necessary, to improve the functioning of NCPs and the effective implementation of the Guidelines. The Committee may seek and consider advice from experts on any matters covered by the Guidelines. For this purpose, the Committee will decide on suitable procedures.

196

© OECD 2003

OECD PUBLICATIONS, 2, rue André-Pascal, 75775 PARIS CEDEX 16 PRINTED IN FRANCE (20 2003 05 1 P) ISBN 92-64-01912-X – No. 53267 2003

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