Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains

The OECD and the Chinese Chamber of Commerce of Minerals, Metals and Chemicals Exporters (CCCMC) have recently launched the Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains.  These Guidelines align with the OECD Due Diligence Guidance for Responsible Mineral Sourcing from Conflict Affected and High Risk Areas and were developed in collaboration with the two organizations. A version in English and Chinese can be accessed here.

The road to responsible investment treaties

by Roel Nieuwenkamp and Kimmo Sinivuori

Originally published by Columbia FDI Perspectives  Perspectives on topical foreign direct investment issues, No. 134 November 10, 2014, Columbia Center for Sustainable Investment.   Available in English and Chinese.

As the OECD Guidelines for Multinational Enterprises, first adopted in 1976 and
updated for the fifth time in 2011, are approaching middle age, it is appropriate to
reflect on how the use of these far-reaching recommendations for responsible business
conduct can be promoted in international investment agreements (IIAs). During the
Guideline’s almost four decades of existence, the landscape of the global economy
has continuously evolved, and securing sustainable development has become a key
international issue.

The OECD Guidelines is a unique tool to address this issue, as they provide voluntary
principles and standards for responsible business conduct in areas such as
employment and industrial relations, human rights, environment, information
disclosure, combating bribery, consumer interests, science and technology,
competition, and taxation.

Economic growth is essential for achieving sustainable development, and private
investment — both domestic and foreign — is its engine. The fundamental question
then is how to ensure that such investment is environmentally sound, promotes labor
standards and respects human rights.

The main aim of IIAs has been, and remains, the protection of legitimate foreign
investors and their investments in the contracting parties. IIAs have so far imposed
obligations on contracting parties only, and not on investors. The rationale of this
approach has been that investors’ obligations must come from domestic legislation, be
it environment or labor-related, and that foreign investors must respect that legislation
in order to be protected by the treaties.

With this in mind, governments have so far encouraged foreign investors to do more
than they are obliged to under the law, based on instruments such as the OECD
Guidelines and the United Nations Guiding Principles on Business and Human
Rights. The question today is whether we can use IIAs to advance the same objectives
as these instruments. Our answer is that we can, if we introduce some carefully
drafted, smart clauses to new treaties.

An approach would be to introduce into an IIA a reference to the OECD Guidelines.

This can be done by preamble language where the parties to a treaty would recognize
the need to promote the Guidelines. This would most likely be the easiest solution —
but at the same time would not create binding obligations on the parties. A stronger
alternative would be to introduce a provision that would oblige the parties to promote
the Guidelines. It could also include an obligation to set up a non-judicial grievance
mechanism that would assist companies and complainants in finding a solution to
issues related to implementation of the Guidelines, through mediation or conciliation.

However, the legally non-binding nature of the Guidelines raises the question of
whether the obligation can only be placed on the contracting parties and only to the
extent that it would cover promotion and a non-binding grievance mechanism. The
legitimate concern has been that a voluntary instrument would be made mandatory
indirectly through another binding international agreement.

Nevertheless, we are in favor of exploring a solution that would stipulate that only
those investors that can demonstrate compliance with the Guidelines would be
eligible for protection under IIAs. This is easier said than done and involves many
complex procedural and substantive issues. It is, however, conceivable to exclude
protection for investments that are linked to corruption. Another option worth
exploring is to include a provision that specifies that materially relevant breaches of
the Guidelines are taken into account by a tribunal when deciding on the merits of a
claim or on potential damages awarded.

The abovementioned approach needs to be complemented by actionable clauses in
treaties that would ensure compliance from a contracting party to implement specific
measures related to the environment, labor standards and human rights. A treaty could
stipulate, for example, that the contracting parties would undertake to become party to
and implement relevant international agreements or standards related to environment,
human rights and labor standards.

To conclude, we believe that, through the addition of clear and smart clauses or
preamble language, it is possible to advance responsible business practices in IIAs
while at the same time protecting the interests of responsible investors and their
investments against maltreatment.

Responsible Business Conduct in Central Asia and South Caucasus

Check out the latest OECD publication on RBC in Georgia!
‘’As part of its work to implement the OECD Guidelines for Multinational Enterprises, the OECD is examining the role of responsible business conduct in building healthy business environments in Central Asia and South Caucasus.

Kazakhstan and Georgia are the first countries to be reviewed in this series of reports focused on responsible business conduct and sustainable development throughout the region. This work contributes to the OECD-Eurasia Competitiveness Programme and is supported by the Government of Austria. It was launched in May 2014 at the Astana Economic Forum in Kazakhstan.’’