Evolving Expectations: The role of Export Credit Agencies in promoting and exemplifying responsible
Commentary, 11 January 2016
Export Credit Agencies are a significant source of global financing and insurance, specifically with regard to financing of large scale projects and business opportunities in developing countries.
For example the Economist Intelligence Unit estimates that the nine largest foreign ECAs provided approximately $488 billion in export financing support in 2013. In 2012 the Berne Union, a union of state and private export credit insurers, covered over 10% of all global trade.
Given the prevalence of ECA financing, as well as its importance for large scale projects which are prone to significant social and environmental impacts, it is important to ensure that responsible business conduct, as recommended by the OECD Guidelines for Multinational Enterprises (‘’the OECD Guidelines”) is viewed as a priority among ECAs.
In a recent publication, Prof. John Ruggie, former U.N. special representative for business and human rights,acknowledged that “[e]xport credit is an obvious governmental source of leverage for compliance with the Guidelines.” Indeed the role of ECAs in promoting the Guidelines has been explicitly recognised in other OECD Instruments. In 2012 the OECD Council of Ministers, the governing body of the OECD, adopted the Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (“the OECD Common Approaches”). This instrument provides that “[m]embers should… [p]romote awareness of the [the Guidelines] among appropriate parties involved in applications for officially supported export credits as a tool for responsible business conduct in a global context.”
The unique grievance mechanism that is attached to the implementation of the OECD Guidelines, known as National Contact Points (NCPs), exists in 46 countries. National Contact Points are agencies tasked with promoting the Guidelines and considering issues (or ‘specific instances’) arising from alleged non-adherence to recommendations of the Guidelines. The OECD Common Approaches likewise provide that members should “consider any statements or reports made publicly available by their NCPs at the conclusion of a specific instance procedure under the OECD Guidelines when undertaking a review.’’ This helps to reinforce the impact of NCP statements regarding company behaviour.
Some member states have taken these recommendations seriously and begun to internalise them within their domestic policy. Canada has been a leader in policy coherence by including (dis)incentives by way of withdrawal of government support in foreign markets for companies that do not embody CSR best practices and refuse to participate in the NCP dispute resolution processes. Furthermore, Canada has demonstrated that it is serious about implementing this policy. In a recent case brought to the Canadian NCP regarding a Canadian gold company’s activities in China, the company refused to engage in the process, which prompted the NCP to conclude that “the Company’s non-participation in the NCP process will be taken into consideration in any applications by the Company for enhanced advocacy support from the Trade Commissioner Service and/or Export Development Canada (EDC) financial services, should they be made.” This was the first time that an NCP decision imposed direct economic consequences on a company for its refusal to engage in the process.
However, beyond simply promoting the OECD Guidelines through consideration of responsible business conduct as a criterion of financing decisions, ECAs have an obligation to espouse good corporate behaviour themselves. Some ECAs are commercial entities operating internationally; therefore some of them fall under the aegis of the OECD Guidelines themselves. Furthermore, the ECAs are not exempt from these expectations in spite of their being government-controlled entities. The Guidelines are clear about the fact that the ownership structure of an multi-national enterprise (public, private or mixed) has no bearing on the relevance of the applicability of the recommendations of the OECD Guidelines.
Recently there was an attempt to recognise the applicability of the OECD Guidelines to ECAs and to align the OECD Common Approaches by introducing expectations of human rights due diligence at the level of ECAs. In the end, the proposal was not successful due to lack of consensus and some ECAs continue to maintain that the OECD Guidelines do not apply to them. However, having made the legally-binding commitment to implement the OECD Guidelines, it would be inconsistent with the objectives and purposes of the Guidelines if government or quasi-government entities were to exempt their own commercial activities from the standards.
In 2012 a complaint was brought to the NCP system against major Norwegian and Dutch pension funds. The final statement of the Dutch and Norwegian NCPs made clear that in their opinions the Guidelines are applicable to government entities engaged in commercial activities. A potentially analogous development is now unfolding in the context of ECAs.
In June of this year the NCP system received a complaint alleging that Dutch export credit agency, Atradius DSB, had failed to comply with the OECD Guidelines in the context of its financing of a dredging project in north-eastern Brazil which has resulted in severe human rights and environmental impacts.
The complaint has very recently been assessed by the Dutch NCP. The ground breaking outcome of this initial assessment is that Atradius DSB itself is considered to be a multinational enterprise and consequently is covered by the OECD Guidelines and the NCP system. The Dutch NCP has offered mediation to the parties to the complaint. This is a process to be monitored carefully as there could be important lessons to be learned. In the first place, the outcome of the complaint may serve to make clear how ECAs should promote the OECD Guidelines amongst their clients. Additionally the complaint may elucidate how some ECAs themselves are expected to behave in the context of the OECD Guidelines.
Rather than await the outcomes of this specific instance, ECAs should be proactive and promote the OECD Guidelines with their clients, integrate the NCP statements in their policies, and internalise the recommendations of the OECD Guidelines within their own commercial activities. This will bring expectations regarding the conduct of ECAs in line with what is expected of as responsible behaviour by all companies.
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