FoEE and Liberia-based SDI allege that ArcelorMittal has breached the OECD Guidelines with regard to its management of the County Social Development Fund (CSDF).
According to the 25-year concession to develop the iron ore deposits that was negotiated in 2005, ArcelorMittal is obliged to provide approximately US$ 73 million over the 25-year span of the Mineral Development Agreement to support socio-economic development in Liberia via the CSDF. The benefits of this fund should go to the Nimba, Bong, and Grand Bassa counties, with specifically 20% of each countys allocation to be spent annually on communities classified as directly affected by ArcelorMittals operations.
The widespread allegations of misappropriation and misuse of the CSDF lead the complainants to conclude that the CSDF is failing to address the needs of communities impacted by the operations of ArcelorMittal. Moreover, the complainants argue that ArcelorMittal is not properly informing neighbouring communities about its operations and the possible impacts on these communities. Additionally, the complainants have concerns about the use of 100 pick-up trucks that were donated by ArcelorMittal to the Liberian government in 2008. Although the trucks were allegedly intended to support agricultural activities, the complainants found them to be mostly in the hands of Liberian government officials
Relevant OECD Guidelines
- Version 2000 Chapter II
- Version 2000 Chapter II Paragraph II.1
- Version 2000 Chapter II Paragraph II.11
- Version 2000 Chapter II Paragraph II.7
- Version 2000 Chapter VI
- Version 2000 Chapter VI Paragraph VI.5
The complaint was originally filed with the Dutch NCP, but after consulting with the complainants it was forwarded to the Luxembourg NCP because ArcelorMittal is headquartered in Luxembourg.
The Dutch NCP offered to assist the Luxembourg NCP with the procedural and the mediation aspects of the process. (The Dutch NCP was prominently involved in the mediation discussions.)
In a related March 2012 development, the Government of Liberia announced that it was “gravely concerned” about the alleged mismanagement of the CSDF and that it would begin an independent and comprehensive audit of the fund. (According to the NCPs final statement, the CSDFs activities were later frozen “following the widespread allegations and several reports by the Auditor General of Liberia and the NGOs about the misuse of funds”.)
With regard to ArcelorMittals pick-up truck donation, the NCP concluded that this issue was “out of the mandate of the NCP to judge whether ArcelorMittal had acted in compliance with domestic and international laws”.
The parties therefore agreed that mediation would focus on the CSDF, and that an expert mediator would assist with drafting a proposal for improving the fund, which would be presented to the Liberian government.
Two fact finding missions took place. During the first, the NCP was accompanied by the mediator, an SDI representative, a Luxembourg foreign office diplomat and an ArcelorMittal representative. After meeting with stakeholders and visiting a number of projects, the mediation team concluded that the “high expectations of the communities combined with the low completion level of the projects had increased local distrust in the Government”.
The mediator conducted a second fact finding mission to explore how to set up a mechanism akin to a social fund, which other foreign companies that are facing similar issues to ArcelorMittal could potentially utilise.
The parties met multiple times throughout the process, including in June and July 2012 and again in March 2013. The final proposal for improving the CSDF that was proposed by the NCP and supported by both parties was communicated to the Liberian government in September 2013, at which time the Luxembourg NCP closed the case.
The NCP observed in its final statement, “Despite the fact of the positive outcome of the mediation, the process will not necessarily end in a significant change of the management of the Fund if the Liberian Government doesnt follow up on the recommendations. However, the bridges between SDI and ArcelorMittal open the potential for future dialogue between all stakeholders on this issue”.
The NCP also encouraged ArcelorMittal “to sustain management control systems that ensure that its operations anywhere in the world are in harmony with the OECD Guidelines”.
The Luxembourg NCP will not be monitoring implementation of the proposal.
ArcelorMittal and FoEEs support of the NCPs proposal to reform the fund was instrumental in the successful conclusion of this complaint.