On 12 December 2019, KTNC Watch, PUSAKA, SKP-KAMe, and WALHI Papua filed a specific instance against the Export-Import Bank of Korean (KEXIM), Posco International, and the National Pension Service (NPS) at the Korean NCP. The complaint argues that KEXIM has breached the OECD Guidelines by failing to implement human rights due diligence to address the adverse impacts caused by its financial services provided to POSCO International.
KEXIM provided the loans to POSCO International‘s subsidiary in Papua, Indonesia, in order to carry out the business in palm oil plantation for several years. The complaint argues that KEXIM failed to review the resaonably foreseeable risk in the palm oil industry when it decided to provide the loans to POSOC International‘s subsidiary in Papua.
The complainants seek the Korean NCP’s good offices to encourage KEXIM to adopt policies for reviewing environmental and social risks in developing natural resources overseas and refrain from providing further loans to support the operations of POSCO International‘s subsidiary in Papua, Indonesia.
Relevant OECD Guidelines
- Chapter II
- Chapter II Paragraph A10
- Chapter II Paragraph A12
- Chapter II Paragraph A13
- Chapter IV
- Chapter IV Paragraph 2
- Chapter IV Paragraph 3
- Chapter IV Paragraph 5
On 16 March 2020, the Korean NCP issued an initial assessment accepting the complaint for good offices. The NCP accepted the complaint regarding POSCO and the NPS; it also accepted the complaint against KEXIM without having yet received a final reply from KEXIM regarding a supplementary (second) submission by the complainants. The NCP’s initial assessment stated (in Korean only) that in this matter, KEXIM could be considered a multinational enterprise covered by the OECD Guidelines because 1) it has oversea branches in the United Kingdom, Indonesia, and Vietnam; 2) in this case, its funding of POSCO was not related to any official development assistance projects; and 3) the financial services it provided to POSCO, providing loans and taking interest, were commercial in nature like those of a typical financial institution. The NCP also found the complaint satisfied the other Guidelines’ admissibility criteria.
In April 2020, KEXIM submitted a final reply protesting the acceptance of the complaint and requested a review of the initial assessment. On 17 September 2020, the Korean NCP breached the Procedural Guidance by reversing its acceptance of the complaint against KEXIM (in Korean only). This time, the Korean NCP argued, on similar grounds as it had argued in prior cases against KEXIM, that the Guidelines did not cover KEXIM’s activities because:
1. The bank is a public corporation to perform public purposes, regulated by a special act.
2. The project in this case effectively constitutes oversees development assistance falling under a governmental “comprehensive plan for overseas agricultural development.”
3. The bank’s activities (including receiving interest in accordance with the OECD Export Credit Arrangement) cannot be considered commercial activities, particularly vis-à-vis domestic case law addressing the Korean Resources Corporation.
4. Using the reasoning applied by other NCPs (Finland, the Netherlands) to their export credit agencies, the Guidelines do not apply to KEXIM in this case.