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FoE US vs. Unocal

Case overview

Date filed 29 April 2003
Current status Blocked
Issue BTC oil pipeline in Azerbaijan, Georgia & Turkey
Summary of the case The 1,760 kilometre-long Baku-Tbilisi-Ceyhan (BTC) oil pipeline runs from the offshore oil fields in the Caspian Sea near Baku in Azerbaijan, through Georgia's national park and close to the town of Tbilisi, finishing south of Ceyhan on the southern shores of Turkey on the Mediterranean at a tanker terminal, where the oil is loaded on to supertankers that transport the oil to Western Europe. The pipeline was constructed by a consortium of oil companies, led by British oil multinational, BP.

The complaint, filled simultaneously with the UK, Germany, Italy, and US NCPs, alleged that BP and consortium partners breached the Guidelines by seeking tax and law exemptions and exerting undue influence on governments to accept a legal regime that was detrimental to human rights and the environment. The complaint also raised concerns about BPs failure to adequately consult with project-affected communities and failure to contribute to the goals of sustainable development.

A second complaint, filed by Proyecto Gato at the Belgian NCP, alleged that the Belgian banks ING, Dexia, and KBC, in supporting the BTC project financially, impeded economic, social, and environmental progress in the host countries. According to the complaint, the banks did not conduct adequate due diligence on the environment, health, and security impacts of the pipeline. In addition, the banks allegedly did not supervise or control the projects progress with respect to the implementation of environmental and social objectives in order to promote sustainable development.
Developments/Outcome Although the case was accepted by the UK NCP in August 2003, BP only responded in detail in March 2004, denying that the project violated the Guidelines.

The discrepancy in factual information that the NCP received from the parties, particularly with regard to the impacts on local people, prompted the NCP to visit the region of the pipeline in the three countries from August-September 2005. The NCPs October 2005 report on the trip indicated that several villagers made specific complaints about intimidation by Turkish state authorities.

A dialogue session was held between the parties in October 2005. However, in January 2006, BP broke off the dialogue process. The company also refused to disclose to the complainants its written response to the issues raised by the villagers during the NCPs field visit. Nevertheless, in August 2007, the NCP issued a final statement that relied heavily on BPs undisclosed response to the field visit. The final statement exonerated the company.

After the UK NCP issued its flawed final statement, the complainants appealed to the UK NCPs Steering Board, arguing that the NCPs statement was unfair and that it failed to “make any serious attempts to engage critically with the issues.” In December 2007, the NCP acknowledged the procedural failures and withdrew its final statement.

In July 2008, the Steering Board conducted the first ever review of the NCPs handling of a specific instance. A summary of the Review Committees findings were made public in September 2008. Following the Steering Boards review, BP agreed to share its previously undisclosed response with the complainants. However, the company still refused to disclose the report to the complainants main partner in Turkey and the issue was only resolved after the arranged mediation between the parties.

On 9 March 2011, the UK NCP issued a revised final statement on the case. The NCP ruled that, in relation to the complaint on consultation, BP was in breach of the Guidelines. The NCP stated that BP had failed to investigate and respond to complaints from local people of intimidation by state security forces in Turkey guarding the pipeline and thus determined that, on this point, BPs activities were “not in accordance” with the Guidelines. The NCP determined that BP had not breached the Guidelines on the other issues in the complaint.
Importantly, the NCPs statement implies that multinationals must take into account the human rights context in which they operate if they are to be considered in adherence with the Guidelines.

The ruling potentially places BP in breach of its contracts with international financial institutions that backed the project with taxpayers' money in 2004. Although the OECD Guidelines are voluntary, BP gave a legally-binding commitment to these institutions that the BTC project would comply with them.

In October 2011, the UK NCP issued a Follow-Up Statement reflecting the progress updates from the parties and the conclusion of the NCP on the implementation of the recommendations outlined it its Revised Final Statement.

One of the main recommendations in the Revised Final Statement was that the company should address the potential weakness in its procedures to respond to allegations of intimidation or breaches of the Voluntary Principles.

In the Follow-Up statement, the UK NCP welcomed the steps taken by the company to identify ways to strengthen its procedures and considers that, if implemented, these steps could reduce the risk of future breaches of the Guidelines. Nevertheless, the NCP remains concerned about the fact that the report from the company does not address the issue of intimidation in north-eastern Turkey. Also the NCP remains concerned about the lack of improvements to the grievance management process especially with regard to the credibility of information received outside the formal procedure and the issue of impartiality

Handling of the cases against the non-British consortium partners

There were also procedural problems related to the handling of the cases against BPs non-British consortium partners. Because BP was the lead company in the BTC consortium, the various NCPs decided in 2004 that the UK NCP would “take the lead” in handling the case. Despite this understanding, the UK NCP decided unilaterally in 2005 that it would only deal with the case against BP. The UK NCP consistently failed to keep its colleagues in other countries informed of its handling of the case. Interestingly, the confusion associated with this case prompted the Investment Committee to agree upon a formal procedure for dealing with multi-country cases in June 2008.

In Italy, the Italian NCP finally agreed in January 2008 to conduct an initial assessment of the case against ENI. The NCP hosted a meeting between the parties, and ENI agreed to submit a written response to some of the issues raised in the complaint. After an exchange of views and a disagreement about the interpretation of the Guidelines with regard to stabilization clauses in investment agreements, the complainants asked the NCP to seek clarification from the Investment Committee. The NCP did not do so for several years, but in January 2011 it informed the complainants that that the issue was being addressed in the context of the update of the OECD Guidelines.

Also in January 2011, the Italian NCP made it clear that the ENI case was on hold and that the NCP would automatically adopt the final statement made by the UK NCP in the BP case. Now that that statement has been issued, the complainants in Italy expect that the Italian NCP will officially adopt the UK NCPs statement and make specific recommendations on ENIs compliance with the Guidelines.

In 2006, the French NCP rejected the case against TotalFinaElf, but no further progress on the cases against the other consortium partners, including those in the US.

The Belgian NCP declared the complainants against the Belgian banks eligible, but transferred them to the UK NCP, thereby closing the case in Belgium. However, the UK NCP unofficially declared that it would not evaluate the role of the Belgian banks, and the cases are considered blocked.
Relevant OECD Guidelines
Case keywords Extractives / mining sector, Seeking/ accepting exemptions, Human rights, Environment, Energy sector, Disclosure of information, Multiple NCPs

NCP Information

NCP name National Contact Point United Kingdom
NCP address 1 Victoria Street SW1H 0ET London, United Kingdom
NCP website www.berr.gov.uk
Other NCPs involved

Complainants

NGO

Company Information

Company responsible Unocal
Company address 14141 Southwest Freeway
77478 Sugar Land
United States
Company website http://www.unocal.com/
Company in violation Baku-T'bilsi-Ceyhan consortium
Country of operations Georgia
Other companies involved

Timeline of developments

Some developments are only visible to logged in users.
Date Actor Action Description Document
1 October 2005 National Contact Point United Kingdom In its entry for the OECD’s 2005 summary of specific instances being considered by National Contact Points, the UK again recorded its status as lead NCP, together with Turkey.  
29 April 2003 Friends of the Earth United States of America file Complaint filed against different companies of the BTC consortium with British, French, German, Italian and UK NCPs. download pdf (145Kb)  
29 April 2003 Friends of the Earth United States of America press release Press release download pdf (27Kb)  

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