National Contact Points for Responsible Business Conduct: the good, the bad, the ugly
Florencia S. Wegher Osci, PhD candidate and a Lecturer in Private International Law at the National University of Litoral. Member of the Advisory Body of Argentina’s OECD National Contact Point and of the Board of the Latin American Academy of Human Rights and Business.
Adopted in 1976, the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (MNE Guidelines) represent the first comprehensive and government-endorsed framework for responsible business conduct directed at multinational companies. They establish expectations for member countries of the Organization, as well as those adhering to the International Declaration on International Investment and Multinational Enterprises, to ensure its effective implementation in relation to the activities of companies operating in or from their jurisdictions. The unique extraterritorial scope of the MNE Guidelines’ makes them especially significant given the barriers to international litigation and the complexities of global supply chains.
To facilitate its implementation, the MNE Guidelines are supported by National Contact Points (NCPs) for Responsible Business Conduct (RBC). Although the NCPs were introduced in the 1984 revision of the MNE Guidelines, it was not until 2000 that they were formally assigned a remedial role, specifically the task of addressing complaints regarding non-compliance with the standards of business conduct outlined in the MNE Guidelines. In its last update, in 2023, the content of the Guidelines was aligned with contemporary standards and regulations on environment and climate change, technology, due diligence, sustainability, and protection of human rights defenders, among other relevant issues, while seeking to reinforce the NCP system as an implementation mechanism.
The NCPs are equipped with a set of promotional and oversight functions and form a system that is interwoven around the common tasks assigned to them, the broad scope of their territorial and personal competence, and the capacity for communication and articulation that arises from their extraterritorial action and their functions within the framework of the Guidelines. This allows them to set themselves up as a real authority to control the activity of the companies insofar as they constitute one key avenue for remediation.
The MNE Guidelines allows specific instances to be filed with the NCPs of the countries where the parent company or its subsidiaries are registered or where they operate. This aspect is of particular interest since it validates an extraterritorial exercise of control of corporate activity, which makes it possible to file a complaint in an NCP of a State other than the one where the abusive activity occurred, even against the parent company. Similarly, it is possible to consider control within the supply chain, indicating violations or non-compliance with respect to companies that are part of the production chain of a particular good or service. The broad mandate of the NCPs has led to their involvement in specific instances across more than 100 jurisdictions, effectively doubling their territorial reach and enhancing the prominence of their role.
Non-judicial mechanisms certainly play an important role in the range of mechanisms contemplated by the UNGPs, with the capacity to contribute to provide for comprehensive reparation of affected rights and strategies to promote prevention of future adverse impacts. In this sense, in the following lines we present some notes that seek to highlight positive and negative characteristics of the functioning of the NCPs.
Limits and capabilities: what to seek, what to expect
In order to design a suitable strategy and set appropriate expectations, it is necessary, as in any other instance of intervention with an impartial third party, to understand the capacities and limits of the chosen mechanism’s functions and competencies. In this regard, NCPs present some distinctive signals that are particularly relevant, especially if they are considered as part of a broader architecture of remediation mechanisms in relation to RBC and in the field of business and human rights.
The good
Among the positive aspects, its broad territorial scope stands out as a defining feature. This characteristic differentiates the NCP mechanism from the jurisdictional limits inherent in domestic judicial systems and conventional legal frameworks. Additionally, the NCP mechanism offers several notable advantages, such as its gratuity, flexibility, and a more predictable duration of its proceedings. These features represent significant benefits when compared to arbitration or court proceedings.
Another key strength of the NCPs lies in their technical expertise and the specialized knowledge of their officers in the field of RBC and due diligence. The construction of a global network of NCPs further enhances the mechanism’s ability to elevate international standards. The NCPs’ role extends beyond merely facilitating agreements between parties; they can also implement follow-up and monitoring mechanisms, issue determinations in their final statements, and suggest strategies for improving due diligence processes to help prevent future violations of the MNE Guidelines.
The bad
In contrast, agreements reached in the specific instance process are not legally enforceable as they do not constitute court judgements or arbitration awards and are, like the procedure itself, voluntary. Another negative aspect is the disparity between the performance of the different NCPs. This can be observed based on the analysis of different variables, not only of the effective compliance with the functional equivalence criteria, or the statistics concerning the number of agreements reached through the specific instances mechanisms, but also considering the conditions of effectiveness required for the non-judicial state based mechanisms in the context of the United Nations Guiding Principles on Business and Human Rights, as well as the requirements for handling specific instances included in the Guidelines[1]. Certainly, the MNE Guidelines strive to eliminate these inequalities, in particular through the definition of functional equivalence criteria and peer review processes, which became mandatory for NCPs since the Guidelines were updated.
The ugly
Concerning the weaknesses in the performance of NCPs, it is worth highlighting the lack of confidence in the mechanism for providing reparations. Although, there has been some progress, as evidenced in the 2023 State of Remedy report produced by OECD Watch and as reflected in the OECD’s report on the mechanism’s 20th anniversary, the majority of the interventions made by NCPs haven’t achieved a positive outcome, considering both the reach of final agreements and other forms of meaningful intervention[2]. Similarly, the absence of a group sensitive approach in the NCPs procedures is a significant shortcoming and an overlooked opportunity especially important if the mechanism is expected to serve as a means to obtain remediation, including through guarantees for non-repetition.
Finally, one key drawback is their largely untapped capacity to advance the RBC agenda. Despite the positive aspects previously mentioned—such as strong technical expertise, a robust set of skills, effective network performance– and the functions assigned to the NCPs in both the MNE Guidelines and the OECD Recommendation on the Role of Government in Promoting Responsible Business Conduct, the mechanism’s potential to transform and enhance the current RBC landscape remains unrealized, with limited examples where NCPs have demonstrated their ability to make a significant impact.
Final remarks
The NCP system functions as a global network of specialized authorities dedicated to promoting and overseeing business activities to ensure compliance with the MNE Guidelines and other OECD´s RBC standards and instruments. Despite facing various challenges, the NCPs have made modest yet meaningful progress in fulfilling these responsibilities. However, significant gaps remain between their actual performance and the system’s needs and expectations, where their inherent strengths are often intertwined with their weaknesses. In particular, shortcomings in meeting standards for functional equivalence and effectiveness in handling specific instances undermine the credibility of the NCPs and hinder the ability of affected parties to seek remedy through this mechanism. This not only impacts the collective strength of the NCP system but also the overall effectiveness of remedy mechanisms and the capacity to hold companies accountable for human rights violations resulting from their operations.
This contribution is part of the project “Acceso a la justicia en el contexto de abusos corporativos: la litigación como estrategia de resistencia y de empoderamiento a las víctimas (ACCJUSTEDH)” (ICI023/23/000001), financed by the International Catalan Institute for Peace.
[1] Particularly relevant in this regard is the work of OECD Watch through their NCP evaluations. See Https://www.oecdwatch.org/indicator/
[2] See OECD´s database of specific instances: https://mneguidelines.oecd.org/database/
Suggested Citation: F. S. W. Osci, ‘National Contact Points for Responsible Business Conduct: the good, the bad, the ugly‘, Nova Centre on Business, Human Rights and the Environment Blog, 26 september 2024