Norwegian government fund in dispute with local OECD contact over multinational guidelines

Fall out follows APG’s recent response to controversial POSCO-India steel plant plans.

A dispute has broken out between Norges Bank Investment Management (NBIM) and the country’s National Contact Point (NCP) for the OECD after it accused NBIM of having no policy on remedying human rights risks for its investments and said it was refusing to co-operate with the OECD’s Multinational Guidelines. NBIM is one of the world’s largest sovereign wealth funds and manager of the Norwegian Government Pension Fund, the $740bn fund, which invests receipts from Statoil, the majority-owned national oil company.
Norway’s NCP is the body that oversees the country’s commitment as an OECD member to the Multinational Guidelines for responsible business conduct, which were last updated in May 2011.
The NCP made its allegations in a report published on May 24, following an investigation into NBIM’s 0.9% holding in South Korean steel giant POSCO over alleged environmental and human rights violations at POSCO-India’s plant in the state of Odisha.
In a terse response Norges Bank said it had complied with the NCP’s requests, but that in its own assessment the case should be rejected. It said it believed that as a minority shareholder, the OECD Guidelines for multinational enterprises do not apply. NBIM said it also thought it would have been appropriate for the Norwegian NCP to await the South Korean NCP’s consideration of the complaint against POSCO. It said: “To our knowledge, the South Korean NCP has not yet completed its consideration.”
In a counter to NBIMs argument, the Norwegian NCP said that examining the complaint against POSCO was beyond its scope and that it only had the authority to consider whether NBIM is or isn’t compliant with the OECD guidelines.Hans Petter Graver, chairman of the Norwegian Contact Point and professor of law, said: “The NBIM argued that the OECD guidelines do not apply to minority shareholders, and for that reason refused to give answers to our written questions. The guidelines do apply, the question is how they apply for an investor with numerous small shareholder positions.”
The NCP says its view is supported by the United Nations High Commissioner for Human Rights. The argument follows controversial interventions by representatives of the OECD in Norway and the Netherlands to bring investors into the ambit of the Multinational Guidelines. RI reported in January that NBIM and Dutch pension fund manager APG were being investigated in their capacity as listed equity shareholders in POSCO. Last month APG said it was prompted by the Netherlands NCP to engage with POSCO to ensure that the planned $12bn plant in India meets internationally recognised sustainability standards. POSCO has listings in New York, London and Tokyo as well as South Korea. Under the Guidelines, ESG concerns can be relayed from the country of the alleged problem for investigation by OECD NCPs in member countries. The Indian POSCO complaint was tabled in October last year by a group of four NGOs: Fair Green Global Alliance, Forum for Environment and Development, Korean Trans National Corporations Watch and Lok Shakti Abhiyan. Construction of POSCO-India’s Odisha plant has been held up since 2005 because of court cases and regulatory proceedings concerning land rights issues and environmental assessments. The OECD Multinational Guidelines have no legally binding statute, but are considered as ‘soft law’ and depend on government pressure, as explained in a recent RI feature