The Australian National Contact Point (NCP) issued a final report finding that an Australian mining company failed to undertake human rights due diligence in its divestment from Myanmar. The NCP’s findings are mostly relevant for companies with investments in high-risk countries, but we advise companies sourcing from high-risk countries to also take note of some of the key recommendations. The NCP’s final statement is rigorous and detailed, and we expect to see similarly robust final statements from NCPs moving forward following an update to NCP procedures in June 2023.
About the case
- NGO Publish What You Pay Australia, Myanmar Alliance for Transparency and Accountability, and the Bawdwin Labour Union submitted a complaint, on behalf of 245 civil society organisations, against Mallee Resources Limited (MYL), an Australian mine developer, to the Australian National Contact Point (NCP) on 14 September 2021.
- National Contact Points (NCPs) are non-judicial governmental grievance mechanisms set up in all OECD countries. They provide mediation and expert decisions on cases related to the OECD Guidelines for Multinational Enterprises (OECD Guidelines). Participation in the NCP process is voluntary.
- MYL declined to participate in mediation and the NCP engaged an Independent Examiner to carry out an investigation into the case. The NCP published a final statement on 2 August 2023 based on the Independent Examiner’s findings.
- In 2017 MYL invested in a joint venture, the Bawdwin Joint Venture (BJV), to develop the Bawdwin mine in Myanmar. Other owners in the joint venture included Myanmar firms Win Myint Mo Industries Co. (WMM) and EAP Global Co Ltd (EAP). In August 2021 MYL sold its interests to WMM following the Myanmar military coup.
- The NCP complaint alleged that MYL did not carry out responsible disengagement in line with the OECD Guidelines when selling its interest to WMM. It included the following allegations
- MYL did not conduct human rights due diligence and meaningful stakeholder engagement ahead of the divestment
- WMM, the buyer, has former ties to individuals sanctioned by the US government, the illegal drug trade and to the previous military regime in Myanmar
- MYL did not exercise its leverage by postponing the sale until it received written confirmation from the buyers on how they would prevent or mitigate anticipated human rights impacts
- MYL did not take steps to prevent or mitigate adverse human rights impacts that could arise from the sale
- MYL did not adequately disclose and communicate reasons for disengagement with civil society and local stakeholders.
- MYL declined to participate in mediation and responded that
- The buyer (BJV) was already a business partner in the joint venture and was socially responsible
- The strategy proposed by the complainants to retain an interest in BJV and to use MYL’s influence on the development of the mine was not possible due to the military coup
- It was unrealistic for the MYL to consult with each stakeholder group after the military coup
- No one was made worse-off from the company’s activities in Myanmar during 2017 to 2021, or its withdrawal from Myanmar
- It had complied with its disclosure obligations as a publicly listed entity on the Australian Stock Exchange (ASX).
- The Independent Examiner found that MYL was not aligned with the OECD Guidelines for Multinational Enterprises in the following ways
- MYL did not and does not have a human rights policy that aligns with the OECD Guidelines and the UNGPs. WMM also does not have a human rights policy.
- MYL should have carried out enhanced human rights due diligence prior to its investment in the Bawdwin mine knowing that the mining sector is high-risk, and Myanmar was already a conflict affected and high-risk country with ongoing conflict in Shan State where the Bawdwin mine is located. MYL conducted an environmental and social impact assessment in 2020, but this does not equate to a robust human rights due diligence risk assessment.
- MYL did not undertake due diligence prior to divesting its interests. It did not evaluate the potential for adverse human rights impacts if it divested to one entity instead of another. There is evidence that MYL’s business partner, WMM is linked with Asia World, a US Sanctioned entity with links to the Myanmar military and heroin trafficking. MYL did not carry out human rights due diligence on these linkages.
- MYL did not disclose human rights risks around the mine in-line with the OECD Guidelines prior to the coup. MYL referenced the political context in Myanmar in general terms but did not disclose that there was active conflict in the township closest to the mine, that members of armed groups lived in the villages surrounding Bawdwin mine, that a military battalion was deployed near Bawdwin mine, and that armed conflict is often associated with fighting for resources.
- MYL did not disclose on its divestment in a way that was aligned with the OECD Guidelines and in a way that local stakeholders could understand. MYL disclosed its divestment from the mine in its ASX disclosures but did not provide any statements translated into Burmese. The ASX disclosures were not sufficient for informing local stakeholders.
- MYL did not engage meaningfully with stakeholders prior, during or after its divestment. The NCP argues that MYL could have engaged with stakeholders despite the conflict through their international partners and representatives.
- The Independent Examiner found that MYL did not have the option to stay invested in the mine and halt mine developments, which was suggested by the complainants. MYL is a small company with only one mining project and this would have not been feasible financially. Additionally, MYL would have broken its contracts with its business partners and WMM would have been able to proceed with the development of the mine regardless.
- The Independent Examiner could not make a determination that MYL was linked to adverse impacts as a result of its activities or divestment.
- Finally, the Independent Examiner noted that the Australian Government did not provide sufficient resources or guidance to companies on how to navigate due diligence in Myanmar. The Australian Government and trade bodies (e.g., Austrade) promoted investment in Myanmar prior to the coup without referencing the human rights risks and human rights due diligence obligations of companies.
- This MYL case is very different from the context of companies sourcing from Myanmar. MYL was invested in Myanmar and was operating in the mining sector, which is known to be higher-risk for linkages to the Myanmar military. MYL was also operating in the Shan State, which was a conflict affected state even prior to the coup.
- However, several of the NCP’s findings are relevant to companies operating in high-risk contexts in other sectors
- Companies are expected to carry out human rights due diligence prior to entering into a high-risk context
- Stock exchange disclosure requirements are not necessarily aligned with human rights disclosure requirements under the OECD Guidelines
- Disclosures need to be accessible for local stakeholders
- Meaningful stakeholder engagement is expected, even in high-risk contexts or when engagement can be difficult.
- The NCP’s final statement is rigorous and detailed. In 2023 the OECD updated the procedures for NCPs under the revised OECD Guidelines. NCPs are now encouraged to investigate and make determinations on cases, and we expect that NCPs will increasingly issue robust closing statements that include their own analysis on whether a company has aligned with the OECD Guidelines.