Silk Road Report - Justice for Iran...Silk Road Report: December 2016 4 About the Report This is our...

OECDGuidelinesonBusiness&HumanRightsDecember2016

SilkRoadReport

JusticeForIranSilkRoadReport:December2016

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SilkRoadReport

OECDGuidelinesonBusiness&HumanRights

JusticeforIran

December2016

Email:[email protected]

Website:www.justiceforiran.org

Copyright©JusticeforIran2016

Reproductionofanyorallpartsofthisdocumentispermissibleonlywithpropercitation.


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TableofContents

ABOUTTHESILKROADPROJECT........................................................................................3

ABOUTTHEREPORT...........................................................................................................4

I. OECDINSTRUMENTS...................................................................................................5

II. DUEDILIGENCEINTHEOECDGUIDELINES..................................................................6

III. OECDCOMPLAINTPROCEDURE................................................................................8

IV. CASESTUDIES..........................................................................................................11


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AboutSilkRoadProjectTheSilkRoadwasanancientnetworkoftraderoutesthatwereforcenturiescentral

to cultural interaction through regions of the Asian continent connecting the East

andWest, fromChina to theMediterranean Sea. Tradeon the Silk Roadplayed a

significant role in the development of the civilizations of China, the Subcontinent,

Persia, Europe, the Horn of Africa and Arabia, opening long-distance political and

economicrelationsbetweenthecivilizations.

The Silk Roadproject aims to promote accountability andprotect human rights in

thecontextofIran’srapidreturntotheworldmarketsafterthe2015NuclearDeal.1

ThroughpublishingreportsonbusinessandhumanrightsinIran,thisprojectintends

to increase awareness among advocates of human rights, particularly lawyers and

civil societyactivists,andaccountability inbusinessandcorporaterelations. Italso

aimstoholdaccountablecorporateswhichareinvolvedorcomplicitinhumanright

violations,usinglegalandotheravailablemechanisms.

1TheJointComprehensivePlanofAction(JCPOA)knowncommonlyastheIrandealorIrannucleardeal,isaninternationalagreementonthenuclearprogramofIranreachedinViennaon14July2015betweenIran,theP5+1(thefivepermanentmembersoftheUnitedNationsSecurityCouncil—China,France,Russia,UnitedKingdom,UnitedStates—plusGermany),andtheEuropeanUnion.Undertheagreement,IranwillreceiverelieffromU.S.,EuropeanUnion,andUnitedNationsSecurityCouncilnuclear-relatedeconomicsanctions.


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AbouttheReportThisisoursecondreportfromtheSilkRoadReportserieswhichaimtoshedlighton

theunderlyingconceptsandinstrumentsaswellasmechanismsthatcanbeapplied

to specific cases of recent contracts and agreements between multinational

corporationsandIraniancompanies,someofwhicharecloselylinkedtoorpartially

owned by human rights violators. In this report, we will briefly explore OECD

guidelines in relation tobusinessandhuman rights. Inparticular,wewill focuson

the OECD Guidelines for Multinational Enterprises and explain the principles

reflectedtherein,placinggreateremphasisoncomplicityandduediligence.Wewill

alsoexplaintheOECDComplaintProcedurethroughanumberofcasestudies.


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I. OECDInstruments

The Organisation for Economic Co-operation and Development (OECD) is an

intergovernmental economic organisation founded in 1960 to stimulate economic

progress and world trade. The OECD member countries are: Australia, Austria,

Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France,

Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia,

Luxembourg,Mexico,theNetherlands,NewZealand,Norway,Poland,Portugal,the

SlovakRepublic,Slovenia,Spain,Sweden,Switzerland,Turkey, theUnitedKingdom

andtheUnitedStates.TheadheringgovernmentsarethoseofallOECDmembers,as

wellas11Non-OECDadheringcountries:Argentina,Brazil,Colombia,Egypt,Jordan,

Latvia,Lithuania,Morocco,Peru,RomaniaandTunisia.

OECDhasproducedanumberofguidelinesinthefieldofbusinessandhumanrights.

The OECD Recommendations on Common Approaches for Officially Supported

ExportCreditsandEnvironmentalandSocialDueDiligence(CommonApproaches)2

require itsmembersandadheringstatestotake intoaccounttherelevantadverse

project-relatedhumanrightsimpacts.Itinstructsmembersto‘encourageprotection

andrespectforhumanrights,particularlyinsituationswherethepotential impacts

fromprojectsorexistingoperationspose risks tohuman rights.' Thisapplies toall

types of officially supported export credits for exports of capital goods and/or

services, except exports ofmilitary equipment or agricultural commodities,with a

repaymenttermoftwoyearsormore.

2RevisedtextfortheRecommendationoftheCouncilonCommonApproachesforOfficiallySupportedExportCreditsandEnvironmentalandSocialDueDiligence,asadoptedbytheOECDCouncilonWednesday6April2016,canbeaccessedhere:<http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=TAD/ECG%282016%293&doclanguage=en>


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OECD Guidelines for Multinational Enterprises (as last revised in 2011) 3 are

recommendationsaddressedbygovernmentstomultinationalenterprisesoperating

inorfromadheringcountries.Theyprovidenon-bindingprinciplesandstandardsfor

responsiblebusinessconductinaglobalcontextconsistentwithapplicablelawsand

internationally recognised standards. The Guidelines are the only multilaterally

agreedandcomprehensivecodeofresponsibility.

The OECD Guidelines set out principles and standards for responsible business

conduct.Theyarerecommendationsfromgovernmentstomultinationalenterprises

operatinginorfromcountriesthataresignatorytotheDeclarationonInternational

Investment and Multinational Enterprises includingthe Guidelines. They provide

guidance for responsible business conduct in areas such as: labour rights, human

rights,environment,informationdisclosure,combatingbribery,consumerinterests,

competition, taxation, and intellectual property rights. While they are not legally

binding, OECD and signatory governments are required to ensure that they are

implemented and observed. What distinguishes the OECD Guidelines from other

corporate responsibility instruments4 and mechanisms is the fact that they are

government-backed standardsand that theyhaveadispute resolutionmechanism

forresolvingconflictsregardingallegedcorporatemisconduct.

II. DueDiligenceintheOECDGuidelines

InourAutumnReport,weexaminedtheconceptofduediligenceintheUNGuiding

Principles.TheOECDGuidelines,too,refertoduediligenceonseveraloccasions,as

shownbelow:

3RevisedtextofOECDGuidelinesforMultinationalEnterprises(aslastrevisedin2011)canbeaccessedhere:<http://www.oecd.org/daf/inv/mne/48004323.pdf>.4Forexample,theUNSustainableDevelopmentGoals:http://www.un.org/sustainabledevelopment/sustainable-development-goals/


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Enterprises shouldconduct risk-based due diligence for theirownoperations–aswell as throughout their supply chains and other business relationships – toidentify,preventandmitigateactualandpotential impacts formatterscoveredbythe Guidelines. This provision applies to all enterprises in all situations, though itshould be noted that the extent and depth of due diligencemay differ from onesituationtothenext.

Enterprises should avoid causing or contributing to adverse impacts5throughoutthe enterprise or in the supply chain or other business relationships. Enterprisesshouldaddress impactswhentheyoccurandseektopreventormitigateadverseimpactsevenwheretheenterpriseitselfhasnotcontributedtotheimpact.

Enterprisesare encouraged to communicate information on their internal audit,risk management and legal compliance systems. Because due diligence is anintegral part of risk management, enterprises should disclose due diligenceprocessesandfindings.

Enterprisesshouldavoidcausingorcontributingtonegativehumanrightsimpacts.Eveniftheydonotcontributetothoseimpacts,enterprisesshouldseektopreventormitigateanyadverseimpactsthattheyarelinkedtothroughtheirsupplychainsorotherbusinessrelationships.

Enterprisesshouldconducthumanrightsduediligence.

Enterprises should mitigate the foreseeable environmental, health and safety-related impacts associatedwith theirprocesses, goodsand servicesover their fulllifecycle.

Two points are worth noting here: Firstly, in the minerals sector, the OECD Due

DiligenceGuidanceforResponsibleSupplyChainsofMineralsfromConflict-Affected

and High-Risk Areas is the international standard for companies along the whole

5Foradetaileddiscussiononadverseimpactsofbusinessesonhumanrightssee:INEF,‘AssessingBusiness-RelatedImpactsonHumanRights.IndicatorsandBenchmarksinStandardsandPractice,INEF-Report110’,2016;availableat:http://inef.uni-due.de/cms/index.php?article_id=4&clang=1&pub=1735


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supply chain. Secondly, EU and national laws mandate due diligencein specific

sectors, such as the EU Anti-Money Laundering Directive and the EU Timber

Regulation.Forexample,theEUAnti-MoneyLaunderingDirectiveexpectsMember

Statestoensurethatentitiestake“appropriate”stepstoidentifyandassessmoney

laundering and terrorist financing risks, taking into account risk factors. Those

steps— and entities’ risk management and mitigation policies, controls and

procedures—areexpectedtobe“proportionatetothenatureandsize”oftheentity.

III. OECDComplaintProcedureThe OECD Guidelines are supported by a unique implementation mechanism of

National Contact Points (NCPs), agencies established by adhering governments to

promote and implement the Guidelines. The NCPs assist enterprises and their

stakeholders to take appropriate measures to further the implementation of the

Guidelines. They also provide a mediation and conciliation platform for resolving

practicalissuesthatmayarise.

The‘SpecificInstance’procedure–astheGuidelines’complaintprocessisofficially

called – is focused on resolving disputes – primarily through mediation and

conciliation,but also throughothermeans– and canbeusedbyanyonewho can

demonstrate an ‘interest’ (broadly defined) in the alleged violation. NGOs from

around theworld have used the complaint process to address adverse social and

environmental impacts causedby corporatemisconduct.NGOshavealsoused the

complaintprocesstoraiseawarenessaboutthefactthatenterprisesareexpectedto

upholdinternationallyrecognisedstandards,contributetosustainabledevelopment

and, at a very minimum, ‘do no harm’ wherever they operate. OECDWatch has

producednumerouspublicationsinthisfieldandmaintainsanonlinedatabaseofall


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Guidelines cases filed by NGOs which are extremely helpful for other NGOs and

activists.

Threephasesofthecomplaintprocess6

Phase1

(InitialAssessment)

It startswhen a complaint is submitted to anNCP. At thisstage the NCP must conduct an initial assessment todetermineifthecasemeritsfurtherexamination.

Phase2

(Mediation)

It starts when the NCP decides the case merits furtherexamination. At this stage the NCP will try to bring thecomplainantsandthecompanytogethertoresolvethecasethroughaprocessfocusedonmediationandconciliation.

Phase3

(FinalStatement)

It involves the NCP issuing a final statement about thecomplaint and mediation process. It should outline theallegedbreachesandhowtheNCPdealtwiththecase.Finalstatements may include recommendations on theimplementation ofthe Guidelines, as well as the NCP’sdeterminationastowhetherabreachoftheGuidelineshasoccurred.

Itmustbenoted that ifmediation fails,NCPs can issuea statementwhichwill be

publiclyavailable.Thiscanthenbeusedtoputpressureonthecompany.However,

even ifadesirableandsuccessfuloutcomemaybe realisticallydifficult toachieve,

thecomplaintprocesscanstillhavestrategicbenefits.Thecomplaintcanhelpraise

public awareness of the issue and consequently, put pressure on the company to

change its behaviour. Additionally, the complaint process can alert government

officials to the alleged violations. Increasingly, investors and financial institutions

monitorthesocialandenvironmentalperformanceofthecompaniesinwhichthey

invest.AnOECDGuidelinescasemayresultinadecisiontodivestacompanyifitis

unwilling to change irresponsible behaviour and is thus putting the financial

6Source:OECDWatch,CallingforCorporateAccountability:AGuidetothe2011OECDGuidelinesforMultinationalEnterprises,availableat:<https://www.oecdwatch.org/publications-en/Publication_3962>.


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institutionatriskofbeinglinkedtoabusesthroughtheirinvestments.

It is alsoworthmentioning that in termsof transparencyandconfidentiality three

differentstagesshouldbedistinguished:

(a)Atthetimeoffilingandduringtheinitialassessment:Thegeneral

ruleforthisstageistransparency.Itispermissibleforcomplainantsto

publicly announce the filing of the complaint and to communicate

about thecontentof thecomplaintwhile theNCP is conducting the

initial assessment. Some NCPs make the outcome of the initial

assessmentpublicontheirwebsite.

(b)While the case is pending: During this phase the general rule is

transparencyofprocess,butconfidentialityofcontent.Complainants

therefore should not publicly disclose information, correspondence,

documentationoropinionslearnedorexchangedduringtheprocess.

It is acceptable for complainants to communicate publicly about

purelyproceduralaspectsincomplaintprocesses,suchaswhetheror

not the company responds to the allegations; whether meetings

betweenthepartiesarebeingorganisedorhave takenplace;and if

mediationhasbegunorended.

(c)Afterthecasehasbeenconcluded:Thegeneralruleforthisphase

istransparency.Attheconclusionofacase,theProceduralGuidance

instructsNCPstomaketheresultsoftheprocessavailableinapublic

report or statement. Complainants are free to communicate about

the outcome and process of the case, bearing inmind the need to


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respecttheconfidentialityofsensitiveinformationexchangedduring

theprocess.7

Twofurtherimportantpointsareworthnotinghere.First,NCPsshouldinformother

government agenciesof their statements and reportswhen they are known tobe

relevant to a specific agency’s policies and programmes. Second, in the case of a

multinational company, the OECD complaint can be submitted to more than one

NCP. For instance, in the case of POSCO, the complaintwas filed in South Korea,

Norway,andTheNetherlands.

IV. CaseStudiesCaseStudy:FailingToPreventHumanRightsAbuses

In2012acomplaintwasfiledagainstPOSCOforitsfailuretoseektopreventhumanrights abuses related to its proposed mine and steel plant in Odisha, India.ComplainantsalsocalledonDutchandNorwegianpensionfundstoseektopreventabuses directly linked to their operations through their investment in POSCO. TheDutch NCP issued a statement confirming that the Guidelines are applicable tofinancialinstitutionsandtoinvestors,includingminorityshareholders.Afteraseriesofmeetingsbetween theDutchpension fundABPand theDutch complainantsanagreementwasreachedonthestepstobetakenbythepensionfundtoexerciseitsleverageoverPOSCOtoensureoperationsare in linewith internationalstandards.Further agreement was reached on a terms of reference for a local independentreviewandassessmentmission.8

7Forfurtherinformationsee:OECDWatch,CallingforCorporateAccountability:AGuidetothe2011OECDGuidelinesforMultinationalEnterprises,availableat:<https://www.oecdwatch.org/publications-en/Publication_3962>.8Seeadetailedanalysisofthecasehere:https://www.academia.edu/12913545/POSCO_s_Odisha_project_OECD_National_Contact_Point_complaints_and_a_decade_of_resistance


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CaseStudy:FailingToConductHumanRightsDueDiligence

AJune2011complainttotheDutchNCPcalledonNideratoimplementacompany-widehumanrightspolicythatincludesduediligenceproceduresconsistentwiththeUN’s“Protect,RespectandRemedy”Framework.ThecomplaintwasfiledbyNGOsfollowing high-profile government investigations that exposed the company’sabusive treatment of temporary workers in its corn detasseling operations inArgentina. After a constructive dialogue, Nidera strengthened its human rightspolicy,formalisedduediligenceproceduresfortemporaryruralworkersandallowedtheNGOstomonitoritsArgentinecornseedoperationsthroughfieldvisits.9

CaseStudy:FailingToStopTheUseOfChildLabourers

In2010,sevencottondealersfromFrance,Germany,SwitzerlandandtheUKwereaccusedofknowinglyprofitingfromforcedchildlabourintheUzbekcottonindustry.Although the efficiency of the procedures conducted by the NCPs differedfundamentally, cases were concluded with joint agreements / final statementswhereby the companies acknowledged responsibility for their supply chains andpromisedtotakestepstoimprovethehumanrightssituationinUzbekistan.

While Otto Stadtlander maintained that it does not receive cotton directly fromUzbeksellers,thecompanystillagreedindiscussionsledbytheGermanNCPtotakesteps to avoid forced child labour and to report back after one year. ECOMAgroindustrialagreedintheSwissNCP-leddiscussionstoallowtheEuropeanCentrefor Constitutional andHuman Rights (ECCHR) to regularly evaluate steps taken bythecompany.LouisDreyfusagreedtofurtherdialoguewithECCHRifconsultationsbetweenthecottontradersandtheUzbekgovernmentfailtoproduceresults.TheICTCottonandCargillCottoncaseshandledbytheUKNCPincludedanagreementtoa follow-up after one year to evaluate their progress. The French NCP, whichhandledthecaseagainstDevcot,S.A.,couldnotestablishifDevcothadbreachedtheGuidelines but held trade in goods produced from forced child labour to be aflagrantviolationoftheGuidelines.

Although the complainants note the commitment of the cotton traders to end

9SeethefinalstatementbytheDutchNCPhere:http://www.oecd.org/investment/mne/Netherlands_final_statement_nidera_03-02-2012.pdf


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forced labour in theUzbek cotton supply industry decreased after the complaintshadbeen concluded, the complaints have triggered positive responses from anumberofinvestmentbanks,whichnowmonitortheUzbekforcedlaboursituationwithupdatesfromthecomplaints.10

CaseStudy:DASAirandAfrimexinDRC

Two important decisions taken by the UK NCP relating to allegations againstcompaniesoperatingintheDemocraticRepublicoftheCongo(DRC).InJuly2008,theUKNCPfoundDASAir,aUK-basedaircargocompany,inbreachofthe human rights and supply chain provisions of the Guidelines for its part intransporting minerals from rebel-held areas of the eastern DRC. Rights &AccountabilityinDevelopment,whichhadfiledthecomplaint,welcomedtheNCP'sdecisionasamajorbreakthrough.ThiswasthefirsttimeaBritishcompanyhadbeenfound to have breached the Guidelines for its conduct during the Congoleseconflict.11Amonth later, inAugust 2009, theUKNCP, in response to a complaint byGlobalWitness,concludedthatAfrimex,amineralstradingcompany,hadalsocontributedto fuelling conflict in theDRC, and that it failed to respect human rights and takeadequatestepstowardsabolishingchildandforcedlabourinitssupplychain.12Thesecaseshavebeencitedassettinganimportantprecedent.AccordingtoBritishNGOs and the Trades Union Congress (TUC), the DAS Air and Afrimex decisions,whichemphasizetheresponsibilitiesofcompaniesinvolvedintradeandservicesinconflict zones, “have demolished the artificial barriers ("supply chain" and"investment nexus") that OECD governments had erected to try to shield theircompaniesfromscrutinyandcensure.”

10SeethereportofTheEuropeanCenterforConstitutionalandHumanRights‘ForcedLabourofChildrenandAdultsinUzbekistan’:https://business-humanrights.org/sites/default/files/media/documents/130507_oecd_complaints_evaluation_en.pdf11http://www.oecdwatch.org/news-en/government-condemns-british-aviation-company-for-fueling-congo2019s-war12http://www.oecdwatch.org/cases/Case_114


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Case Study: Involvement In Building And Maintenance Of Guantanamo BayIncarcerationFacilities

In a2005 complaint filedwithNorwayNCP, the complainant, ForUM,alleged thatAker Kværner ASA, through itswholly owned subsidiary Kværner Process ServicesInc.(KPSI),hadbreachedtheGuidelines’humanrightsprovisionatGuantanamoBay,Cuba.Since2001,KPSI’sactivitieswereexpandedtoincludethebuildingandmaintenanceof facilities for the incarceration of captives taken during military operations in,among other places, Afghanistan and Cuba. The complainants contend that AkerKværnerandKPSIwerecontributingtoaprisonsystemthatabusesinternationallawandcorehumanrights.TheNCPmetjointlywiththecomplainantsandcompanyinSeptemberandOctober2005 and issued a statement the following November reprimanding the companyand noting, “the activities that the company has carried out can be said, at leastpartly,tohaveaffectedtheinmatesoftheprison”.The NCP clarified that this complaint did not raise the question of whether AkerKværner had directly violated human rights laws, as “human rights conventionsapply to states only, and companies cannot therefore be held responsible forviolationsofhumanrights.”TheNCPadded,however,thatcompaniescan,throughtheir ownactionsor omissions, be complicit in or profit fromviolationsof humanrightsbystates(OECDGuidelines,ChapterII,RecommendationNo.2).TheNCPthusconsideredwhetherthecompanyhadfailedto“respectthehumanrightsofthoseaffected by (its) activities consistent with the host government’s internationalobligationsandcommitments.”TheNCPexaminedaseriesofinternationalreportsexpressingseriousconcernaboutthe operation of the detention facilities at Guantanamo Bay. The NCP recognizedthatsuchcriticismwasdirectedatthedetentioncampandnottheMarinebase,butfound that Aker Kværner and its subsidiary KPSI had occasionally carried outmaintenanceworkonsharedoperationalandsupplyfunctionsboththebasedandtheprison.Thus,sincetheoperationoftheprisondependsonthemaintenanceofjoint infrastructure (the typeofworkcarriedoutbyKPSI), theNCPconcluded thatKPSI’sactivities“atleastinpartcanbeconsideredtohaveaffectedtheinmates.”


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TheNCPacknowledgedthatthenatureandextentofAkerKværner’sactivitieswereunclear, because the company refused to provide specific information about itsactivities at Guantanamo despite theNCP’s repeated requests. TheNCP observedthat Aker Kværner could have provided extensive documentation withoutcompromisingitsconfidentialityobligationstowardsUSauthorities.TheNCPaddedthat Aker Kværner had not submitted documentation of the company’s internalethical assessments in relation to its activities at Guantanamo Bay, including anyboarddiscussions of these issues. This led theNCP to conclude that the companyhadnot drawnup ethical guidelines for its activities.Moreover, Aker Kværner didnotusetheGuidelinesasabasisforitsassessments.The NCP emphasized the importance of continuous assessments by Norwegiancompaniesoftheiractivities inrelationtohumanrights ingeneral,addingthattheprovisionofgoodsorservicesinsituationslikeGuantanamoBayrequire“particularvigilance.”TheNCPfurtherconcludedthatAkerKværnershouldhaveundertakenathorough and documented assessment of the ethical issues in connectionwith itstender for the renewal of the contract in 2005. The NCP therefore urged thecompanytodrawupethicalguidelinesandtoapplytheminallcountriesinwhichitoperatesinordertocomeincompliancewithChapterII,RecommendationNo.2.Aker Kværner has ceased its operations at Guantanamo Bay. The official reasongivenwasthecompanylostitscontractwiththeUSDepartmentofDefence.13

13http://www.oecdwatch.org/cases/Case_81;http://www.accessfacility.org/oecd-ncp-norway-forum-environment-and-development-vs-aker-kv%C3%A6rner-asa


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AboutTheSilkRoadProject

The Silk Roadwas an ancient network of trade routes thatwere for centuries

centraltoculturalinteractionthroughregionsoftheAsiancontinentconnecting

theEastandWest,fromChinatotheMediterraneanSea.TradeontheSilkRoad

played a significant role in the development of the civilizations of China, the

Subcontinent, Persia, Europe, the Horn of Africa and Arabia, opening long-

distancepoliticalandeconomicrelationsbetweenthecivilizations.

TheSilkRoadprojectaimstopromoteaccountabilityandprotecthuman

rights in thecontextof Iran’s rapid return to theworldmarketsafter the2015

NuclearDeal.1ThroughpublishingreportsonbusinessandhumanrightsinIran,

this project intends to increase awareness among advocates of human rights,

particularlylawyersandcivilsocietyactivists,andaccountabilityinbusinessand

corporate relations. It also aims to hold accountable corporates which are

involvedor complicit in human right violations, using legal andother available

mechanisms.

JusticeforIran

April2017

Email:[email protected]

Website:www.justiceforiran.org

Copyright©JusticeforIran2017

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