[Comment]

For Whom the Korean NCP Exists When It Only Exonerates Korean Companies Linked to the Myanmar Military Responsible for Massacre?

On July 16, 2021, the Korean National Contact Point (hereafter “Korean NCP”) established in accordance with the OECD Guidelines for Multinational Enterprises dismissed the complaints against several Korean companies including Posco International for their direct business relations with the Myanmar military at the initial assessment stage. We, civil society organizations in and out of Korea that filed the complaint here publicly announce that we cannot accept the Korean NCP’s decision interpreting business’ human rights responsibility too narrowly and we will officially question the decision to competent authorities including the OECD Investment Committee.

Korean Civil Society in Solidarity with Rohingya, Korean TransNational Corporations Watch, and Justice for Myanmar submitted a complaint against five Korean companies which have business relations with Myanmar Economic Holdings Limited (hereafter “MEHL”) run by the Myanmar military to the Korean NCP in December 2020. The complainants filed an additional complaint against POSCO International in February 2021. The complaints asked the Korean NCP to find whether the following six Korean companies violate the Guidelines: the three companies of POSCO C&C, Pan-Pacific, and Inno Group for running a joint venture with MEHL; Lotte Hotels & Resorts for running hotels jointly with the Myanmar military; and POSCO International for selling a warship to the Myanmar Navy and DaeSun Shipbuilding for fabricating the warship.

First of all, we have to question procedural violations by the Korean NCP. Pursuant to the operational rules of the Korean NCP, an initial assessment to decide whether further examination of the specific instance would be necessary should be made within three months from the date the complaint was filed (Operational Rules Art. 15 Para. 1). The Korean NCP notified the complainants of its initial assessment to dismiss the complaints only on July 16, far exceeding the three-month deadline, which is a clear violation of the procedure. The Korean NCP never provided any explanations to the complainants about what caused the delay.

What is more serious is that the initial assessment unfairly exonerates the respondent Korean companies from their responsibilities under the Guidelines by distorting and mis-interpreting the Guidelines.

The Korean NCP dismissed the complaints for the following reasons: First, the Korean NCP found the respondent companies were not directly related to the Myanmar government’s Rohingya policy and therefore, if the Korean NCP further examines the specific instance, it would amount to applying the Guidelines to the acts of the Myanmar government which is beyond the mandates of the Korean NCP; Second, regarding the sale of the warship, the Korean NCP held that there was no evidence that the warship was “directly engaged with” mass-killing of Rohingya people; Third, DaeSun Shipbuilding is not a multinational enterprise and DaeSun only provided the ship to POSCO International; and finally, the Korean NCP stated that a further consideration of the specific instance would not contribute to the purposes and effectiveness of the Guidelines because POSCO C&C is reconsidering its business relationship with MEHL, Pan-Pacific ended its joint venture with MEHL, Inno Group did not pay dividends to MEHL while expressing its plan to value human rights of workers in its operations, and POSCO International has developed its human rights management guidance and is in the process of setting up detailed procedures for the guidance.

First, we would like to point out that the Korean NCP misinterpreted the purpose of the Guidelines when it determined that applying the Guidelines to the acts of the Myanmar government is beyond its mandates. The Korean NCP referenced the Australian NCP’s decision in Human Rights Law Centre, Raid vs. G4S, claiming that “any move that can be considered commenting on the policies or laws of the Myanmar government is hard to fall under the mandates of NCPs.” However, the OECD Investment Committee in its response to the substantiated submission regarding the Australian NCP’s decision stated that:

“The recommendations of the Guidelines, as well as enterprises’ responsibility to respect human rights, represent expectations of enterprises which are distinct and separate from government duties. … It is important that NCPs carefully distinguish the enterprise responsibility to respect human rights and the due diligence requirements that accompany that, from the broader State duty to protect human rights.”

In this specific instance, complainants did not ask the Korean NCP to make a determination about the Myanmar government’s policy. Instead, complainants asked the Korean NCP to address and decide Korean companies’ responsibility to respect human rights in their investment and business activities in Myanmar. However, the Korean NCP made an erroneous conclusion that it was about the Myanmar government policy. Such a conclusion is not only the result of arbitrary interpretation of complainants’ arguments but also contrary to what the above mentioned OECD Investment Committee recommended.

Second, the Korean NCP determined that the respondent Korean companies did not “contribute” to the adverse human rights impacts on the Rohingya people. To begin with, the initial assessment of the NCP is not to make a judgment whether specific norms under the OECD Guidelines were violated (either causing, contributing to, or directly linked to adverse impacts), but to determine whether there is need for further examination and good office provision. The Korean NCP’s Operational Rule Art. 15, Para. 1 clearly states that an initial assessment is to “decide whether further process of additional examination and/or good office is needed by taking into account six factors.”

Nevertheless, in this specific instance, the Korean NCP concluded that the respondents did not “contribute to” adverse impacts under the factor “whether there seems to be a link between the enterprise’s activities and the issue raised in the specific instance.” This is an erroneous application of the procedure. An initial assessment is only to determine “a link.” It should not make a judgement about whether there were specific violations of the Guidelines. However the Korean NCP decided it at its initial assessment.

What is worse is that it addressed only the question whether the respondents “contributed to” the adverse impacts. Even if we concede that the Korean NCP might make a judgment about the violations at an initial assessment, the Korean NCP should have examined all the three levels of responsibility (causation, contribution, and direct link) under the OECD Guidelines. The Korean NCP did not bother to examine the three levels regarding the respondents’ responsibility at all.

There are more than enough documents including reports by international organizations and international NGOs to show that a joint venture with MEHL puts Korean companies at least in direct link to human rights violations in Myanmar. Exporting a warship to Myanmar requires no further explanation. To what level of the Guidelines’ violations such a relationship amounts is to be determined through further examination and good office. Nevertheless, the Korean NCP unilaterally accepted the explanations of the respondents to make a judgment that the respondents did not contribute to adverse impacts.

Third, the Korean NCP determined that the respondent DaeSun Shipbuilding was not a multinational enterprise based on the Operational Rules and a previous decision made by the Korean NCP. However, the Operational Rules of the Korean NCP provide a narrower definition of a multinational enterprise requiring that a multinational enterprise should operate in more than two countries while the Guidelines refuse to give a definition of multinational enterprises. Such a narrower definition results in a wrong decision repeatedly.

The decision in Bahrain Watch et al. vs. Dae Kwang that the Korean NCP referred to in denying DaeSun Shipbuilding a multinational enterprise was criticized by OECD Watch, an official civil society advisory body to the OECD Investment Committee for the same reason:

“The NCP’s statement claims that “The OECD Guidelines require that multinational enterprises should be companies existing in multiple countries that are mutually connected through ownership or stakes in the company.” But saying that the Guidelines “require” this to be the case is a misrepresentation. What the Guidelines actually say is that MNEs are “usually” companies in multiple countries that “usually” implies that other constructions are possible. In fact, the text of the Guidelines specifically emphasizes that no fixed definition of multinational enterprise is required for the purposes of the Guidelines. Thus, the Korean NCP’s insistence that a strict definition of MNEs be met is erroneous. In the end, no matter what the interpretation, the fact is that if the Korean NCP were genuinely committed to the effective implementation of the OECD Guidelines, it could have at least accepted the complaint and try to get the parties together to seek a solution rather than rejecting the case outright at the initial assessment phase.”

The Korean NCP has built erroneous precedents not in compliance with the purposes of the Guidelines by wrongfully making its Operational Rules and applying them. We, the complainants, plan to ask the OECD Investment Committee to examine the Korean NCP’s misinterpretation of the Guidelines in enacting its Operational Rules and in handling specific instances.

Fourth, the Korean NCP held that a further consideration of the specific instance would not contribute to the purposes and effectiveness of the Guidelines because POSCO C&C announced it would reconsider its business relationship with MEHL and Inno Group did not pay dividends to MEHL. In making such a determination only based on what the respondents presented in their responses, the Korean NCP did not examine whether these companies would actually end their relationship with MEHL or would continue to suspend dividends. In fact, whether the respondents would keep their words should be verified through follow-up measures such as a further examination or good office beyond an initial assessment. In other words, in order to ensure these measures to be implemented, either a further examination or good office process is required. Nevertheless, the Korean NCP rejected the complaints by accepting unilateral arguments from the respondents without any verification.

Fifth, the Korean NCP stated that POSCO International’s human rights management guidance should be considered as a process to realize the complainants’ demands, and therefore there was no need for further consideration. POSCO International did announce its commitment to respecting human rights and implementing human rights due diligence when necessary at its website before the complaints were filed. If POSCO International’s human rights management guidance referred by the Korean NCP means the commitment published at its website, the company should have conducted due diligence to examine whether its export of a warship had any adverse human rights impacts on the Rohingya people. However, POSCO International has not provided any information about its due diligence efforts. In fact, all the respondents failed to answer whether they conducted any human rights/environmental impact assessments. The Korean NCP is responsible for promoting responsible business conduct proclaimed by the OECD Guidelines and human rights due diligence is an essential part of responsible business conduct. Nevertheless, the Korean NCP failed to examine due diligence efforts by the respondents.

Finally, one of the respondents, Lotte Hotels & Resorts, completely ignored the Korean NCP process. The company did not respond at all despite the Korean NCP requesting the company’s response twice. However, the Korean NCP closed the case even regarding Lotte Hotels & Resorts. The Korean NCP should have made a separate decision for Lotte Hotels & Resorts or at least suspended the decision until a meaningful communication to be made with the respondent. It is hard to expect any company to respond in good faith to the NCP process in the future when the Korean NCP finds in favor of a company which provides no response. By deciding in favor of Lotte Hotels & Resorts despite its non-response to the process, the Korean NCP significantly undermined the authority of the NCP process and degraded itself among Korean companies.

Unfortunately, it is not the first time that the Korean NCP failed to meet its mandates and expectations. There is hardly a single case where the Korean NCP has properly handled and provided recommendations both in terms of procedures and substances since it was first established. Even considering the frustrating records of the Korean NCP, it is not acceptable that the Korean NCP rejected the complaints against all the six respondents for their business relations with the Myanmar military at an initial assessment stage. For what and for whom the Korean NCP exists? The Korean government should answer why the Korean NCP should continue to exist when it fails to comply with not only the Guidelines but also its own Operational Rules and only serves to exonerate companies.