Organisation for Economic Co-operation and Development (OECD)

 

 

 

OECD Multinational Enterprises Guidelines

 

What are the MNE Guidelines?

The Guidelines are recommendations addressed by governments to multinational enterprises operating in or from adhering countries (the 34 OECD countries plus 8 non-OECD countries: Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania). They provide voluntary principles and standards for responsible business conduct, in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, competition, taxation, and science and technology.

 Although many business codes of conduct are now publicly available, the Guidelines are the only multilaterally endorsed and comprehensive code that governments are committed to promoting. The Guidelines' recommendations express the shared values of governments of countries that are the source of most of the world's direct investment flows and home to most multinational enterprises. They aim to promote the positive contributions multinationals can make to economic, environmental and social progress.

 The Guidelines have several distinguishing features that helped them gain acceptance and continue to ensure they are supported. First, observance of the Guidelines is voluntary. Their non-binding nature, however, does not imply less commitment by Adhering Governments to encourage their observance. The active system under which the Guidelines are promoted and implemented attests to the importance Adhering countries give the Guidelines.

 Also, the Guidelines' basic approach is balanced. The assumption is not that enterprises need to be "controlled" but that internationally agreed guidelines can help prevent misunderstandings and build an atmosphere of mutual confidence and predictability between business, labour and governments. A continuing, pragmatic approach has characterised the Guidelines process and helped make them work.

Although they are addressed to enterprises, the Guidelines need the support of the business community, labour representatives and non-governmental organisations in order to be effective. The countries adhering to the Guidelines will work with all of these actors and there is every reason to believe that constructive collaboration will develop that helps the business community define and achieve appropriate standards of conduct. In addition, the post-Review period is likely to be one of expanding adherence to the Declaration of which the Guidelines is an integral part. Several non-OECD members have already adhered to the Guidelines and others that are willing and able to meet the disciplines in the Declaration would be welcome too.

The Guidelines are part of a package. They are one part of the OECD Declaration on International Investment and Multinational Enterprises, a broad political commitment adopted by the OECD Governments in 1976 to facilitate direct investment among OECD countries.

 The Declaration on International Investment and Multinational Enterprises promotes a comprehensive, interlinked and balanced approach for governments' treatment of foreign direct investment and for enterprises' activities in Adhering countries. The OECD instruments on international investment and multinational enterprises are one of the main means by which the OECD assists Adhering countries in working towards a liberal regime for foreign direct investment, while at the same time ensuring MNEs operate in harmony with the countries where they are located.

 The Declaration on International Investment and Multinational Enterprises comprises four instruments for international cooperation:

• The Guidelines for Multinational Enterprises represent a non-binding code of conduct of corporate behaviour addressed to the multinational enterprises;
• Under the National Treatment Instrument, Adhering countries commit themselves to treating foreign-controlled enterprises operating in their territories no less favourably than domestic enterprises in like situations;
• An instrument on Conflicting Requirements calls on Adhering countries to avoid or minimise conflicting requirements imposed on multinational enterprises by governments of different countries;
• An instrument on International Investment Incentives and Disincentives provides for efforts among Adhering countries to improve cooperation on measures affecting international direct investment.

(source: www.oedc.org)

Investment nexus?

Who are the MNE Guidelines for?

"I. Concepts and Principles

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.

Clarifications

The Guidelines do not define the term "multinational enterprises", a concept which embraces a diversity of situations found throughout the business world. Rather, they describe some general criteria covering a broad range of multinational activities and arrangements. These arrangements can include traditional international direct investment based on equity participation, or other means which do not necessarily include and equity capital element. Majority ownership is not the exclusive form of linkage between two companies in different countries which allows one to excercise a significant influence over the activities of others. Accordingly, an entity may be considered part of a multinational enterprise without necessarily being a majority owned subsidiary. The sharing of knowledge and resources among companies or other entities does not in itself indicate that such companies or entities constitute a multinational enterprise."

Who is applying MNE Guidelines?

The institutional set-up for promoting and implementing the Guidelines is described in the OECD Council Decision (Decision of the Council on the OECD Guidelines for Multinational Enterprises, 27 June 2000, C(2000)96/FINAL) and its Procedural Guidance. It consists of three main elements: the National Contact Points; the OECD Investment Committee; and the advisory Committees to the OECD of business and labour federations, the Business and Industry Advisory Committee and the Trade Union Advisory Committee respectively.

What are National Contact Points?

National Contact Points are government offices responsible for encouraging observance of the Guidelines in its national context and for ensuring that the Guidelines are well known and understood by the national business community and by other interested parties. The National Contact Point:

• Handles enquiries about the Guidelines;
• Discusses matters related to the Guidelines and assists in solving problems that may arise in this connection;
• Gathers information on national experiences with the Guidelines and reports annually to the Committee.

Because of the central role it plays, the effectiveness of the National Contact Point 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 recently concluded review has enhanced the accountability of National Contact Points by calling for annual reports of their activity, which will serve as a basis for exchanges of view on the functioning of the National Contact Points among the adhering governments.

The list of National Contact Points is updated regularly on this site.

What is the Investment Committee?

The OECD Investment Committee, comprising all OECD member countries and observers, is the OECD body responsible for overseeing the functioning of the Guidelines and it is expected to take steps to enhance their effectiveness. This responsibility applies not only to the Guidelines but to all the elements of the Declaration on International Investment and Multinational Enterprises. Regarding the Guidelines, its responsibilities include:

• Responding to requests from adhering countries on specific or general aspects of the Guidelines;
• Organising exchanges of views on matters relating to the Guidelines with social partners and non-members;
• Issuing "clarifications" as necessary (see "Clarifications" below);
• Reviewing the Guidelines and/or the procedural Decisions so as to ensure their relevance and effectiveness;
• Reporting to the OECD Council on the Guidelines.

The non-binding nature of the Guidelines precludes the Committee from acting as a judicial or quasi-judicial body. Nor should the findings or statements made by a National Contact Point (other than interpretations of the Guidelines) be questioned through a referral to the Committee.

What role do business, labour and civil society representatives play?

As the Guidelines are addressed to enterprises, business, labour and civil society input is especially important. The Investment Committee regularly consults with the Business and Industry Advisory Committee (BIAC), the Trade Union Advisory Committee (TUAC) and OECD Watch, an international network of civil society organisations, on matters relating to the Guidelines and on other issues concerning international investment and multinational enterprises.

BIAC, TUAC and OECD Watch may request consultations with the National Contact Points on issues related to the Guidelines. They can also raise such issues directly with the Investment Committee. In addition, they are responsible for informing their member federations about developments in the Guidelines and for seeking their members' inputs in Guidelines implementation procedures. They may also participate in promotional activities organised by the National Contact Points or by the Committee on a national, regional or multilateral basis.

In addition, they actively participate in various other OECD activities on foreign direct investment, and comment on papers and studies on foreign direct investment, as well as participate in other OECD programmes of interest to them.

What part do non-governmental organisations play?

Non-governmental organisations (NGOs) were first involved in the Guidelines process on the occasion of the 2000 Review of the Guidelines. As provided in the Procedural Guidance of the Council Decision on the Guidelines, NGOs may request consultations with the National Contact Points on issues related to the Guidelines. They may also participate in promotional activities organised by the National Contact Points or by the Committee on a national, regional or multilateral basis.

Cases

UK NCP statement on Oryx Natural Resources

15. The UK Government is firmly committed to the Guidelines as a baseline for corporate behaviour and an aid to companies drawing up their own codes of conduct. The purpose of the Guidelines is not to act as an instrument of sanction nor to hold any company to account. The implementation procedures within the Guidelines are a problem-solving mechanism with a view to parties coming to an agreement, or the NCP making recommendations, for future behaviour in similar circumstances.

Annex 1

2. The Guidelines have a mechanism, which allows a person or organisation to raise a complaint against a company under the Guidelines. The whole process is future-focussed and based not on naming and shaming companies for alleged past breaches but on examining ongoing issues with a view to a change in the company’s procedures, if appropriate. Before being accepted, the complainant must first submit the complaint, supported by evidence, to the NCP for assessment.

UK NCP statement on DAS AIR

2. The Guidelines are recommendations that governments endorse and promote in relation to the behaviour of multinational enterprises. The Guidelines are voluntary principles and standards for responsible business conduct. They are the only comprehensive, multilaterally-endorsed code of conduct for multinational enterprises.

3. The Guidelines establish non-legally binding principles covering a broad range of issues in business ethics in the following areas of operation: general company policies, disclosure of information, employment and industrial relations, environment, combating bribery, consumer interests, responsible use of science and technology, competition and taxation.

4. The Guidelines are not legally binding, but OECD governments and a number of non OECD members are committed to promoting their observance. The Guidelines are also supported by the business community and labour federations. In addition, a number of Non-Governmental Organisations are also heavily involved the work of the OECD Investment Committee responsible for monitoring and reviewing the Guidelines and are increasingly involved in overseeing the operation and promotion of the Guidelines.

50. The NCP concludes the lack of due diligence on the supply chain, meant that DAS Air did not meet the requirements of the following paragraphs of the Guidelines:
II.1 Contribute to economic, social and environmental progress with a view to achieving sustainable development.
II.2 Respect the human rights of those affected by their activities consistent with the host government’s international obligations and commitments.
II.10 Encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the guidelines.

UK NCP statement on Avient

The U.K. Government is firmly committed to the Guidelines as a baseline for corporate behaviour and an aid to companies drawing up their own codes of conduct. The purpose of the Guidelines however, is not to act as an instrument of sanction nor to hold any company to account. The implementation procedures within the Guidelines are a problem solving mechanism with a view to parties coming to an agreement or for the NCP to make recommendations for future behaviour in similar circumstances. In this case, given that there is no complainant, it falls to the NCP to make recommendations.

US NCP on FoE US & RAID vs. Cabot Corporation

Global Witness vs. Afrimex

Overal information about the situation in DRC and the Great Lakes region

Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo