Open Secrets & CALS vs. KBC Group

Date filed

24 April 2018

Keywords

Countries of harm

South Africa

Current status

Rejected

Sectors

NCP

NCP Belgium

Allegations

On 24 April 2018, Open Secrets and the Centre for Applied Legal Studies filed a complaint with the Belgian and Luxembourg NCPs against Kredietbank Luxembourg (KBL) and Kredietbank (now called the KBC Group or KBC) for their alleged breaches of the OECD Guidelines. The complaint alleges that in the 1970s and 1980s, the banks facilitated a series of clandestine financial transactions to sell arms to Armscor, the state-owned arms procurement and production company of the then-apartheid government of South Africa, in violation of the United Nations Security Council arms embargo. The complainants assert the banks provided multitudes of numbered bank accounts to Armscor and shell companies in foreign jurisdictions for the purpose of faciliating weapons deals between Armscor and global arms companies in violation of the embargo.

In the complaint, Open Secrets and CALS ask the NCPs to determine whether the banks have breached the Guidelines and investigate the extent to which there should be punitive action taken against KBL and KBC Group for their role in facilitating the arms trade. The complainants hope that as a result of the complaint, KBL and KBC Group will issue an apology to South Africans and the South African government for their complicity in supporting the apartheid regime and violating the arms embargo during apartheid. Furthermore, Open Secrets and CALS hope the NCP process will encourage the European banking community to establish an oversight and accountability mechanism to ensure that financial institutions are not complicit in human rights violations as a result of their business activities.

Relevant OECD Guidelines

Outcome

The Belgian and Luxembourg NCPs divided the complaints such that the Belgian handled the claims against KBC and the Luxembourgian handled the case against KBL.

On 28 May 2018, Mr. Juan Pablo Bohoslavsky, UN Independent Expert on Foreign Debt and Human Rights, submitted an amicus brief to the Belgian and Luxembourgian NCPs in support of the complaint.

On 6 June 2018 Open Secrets and CALS alerted the Belgian and Luxembourg authorities to a perceived conflict of interest within the National Contact Point in Belgium: several senior KBC executives hold influential positions within the Federation of Enterprises in Belgium, a key organization within the tripartite structure of the NCP. Open Secrets and CALS requested a recusal of those conflicted parties, concerned their involvement could derail the legitimacy of the process. The Belgian NCP declined to remove the conflicted parties.

On 12 July 2018, Open Secrets and CALS wrote the OECD Secretary-General about their concerns over the conflict of interest at the Belgian NCP. The OECD Investment Committee responded at the request of the Secretary-General, suggesting proposals to ensure impartiality of the NCP. On 4 September 2018, the Belgian NCP members reconsidered the conflict of interest request, but unanimously confirmed that they believed the NCP’s Rules of Procedure provided the necessary guarantees.

On 24 April 2019, Open Secrets and CALS penned an op-ed expressing frustration with the unacceptable delays in its processing. A full 12 months since the case’s filing, the NCPs had still not concluded the initial assessment phase.

On 24 June 2019, the Belgian NCP rejected the specific instance against KBC. The Belgian NCP asserted that seeking a public apology by KBC, taking punitive action against KBC, and helping to promote an EU-level monitoring mechanism to ensure that banks are not accomplices to human rights violations all fall outside the bounds of the scope and competence of the NCP. OECD Watch considers that the first two of these requests are indeed within the scope of NCPs: NCPs may seek apologies from a party, and they may also seek for other ministries to apply punitive sanctions to companies found to have violated the Guidelines or acted in poor faith toward the specific instance process. The Belgian NCP also rejected the request to consider whether KBC had breached the OECD Guidelines, on grounds of the long length of time (30/40 years) since the events under discussion, the unwillingness of the parties to mediate, and the ability of the NCP to offer good offices in such a setting.

Of note, the three trade union representatives who sit in the Belgian NCP expressed deep disappointment that the request to consider whether KBC breached the Guidelines was not accepted, as they asserted that request could be accepted without prejudging whether or not KBC had breached the Guidelines.

The Luxembourg NCP found the complaint not material and substantiated and that the link to KBL was too tenuous. The Luxembourg NCP asserted that investigation of the complicated facts of so long ago “does not fit in the mandate of the NCP’s but would rather require a thorough investigation by competent authorities such as the attorney general in Belgium and/or Luxembourg (“Parquet du Procureur”) on alleged involvement of the banking entities that eventually became KBC Group and KBL European Private Bankers in the financing of illegal and clandestine weapons sale at the time.” Ultimately, the NCP concluded that “the Luxembourg NCP – which at this stage is not determining or trying to determine if KBL European Private Bankers has breached the OECD Guidelines, or even acted inconsistently with regard to them – has come to the conclusion that the consideration of the specific issue would not contribute to the purposes and effectiveness of the Guidelines.”

On 27 April 2020, the UN Independent Expert Bohoslavsky issued a news release about the cases, expressing shock that some of the Belgian NCP’s private sector participants involved KBC group and stating that “Being judge and judged at the same time is against basic legal principles.” The UN Expert urged that “OECD member states should consider establishing a mechanism to prevent conflict of interest of their National Contact Points (NPC’s) corporate review process to strengthen the procedure and its credibility.” He said he “agreed with [the] OECD that States should ensure National Contact Points operate impartially and without any risk of real or perceived conflict of interest.”

The complainants feel that, far from living up to their stated values of transparency and accountability, the NCPs in Belgium and Luxembourg, and the OECD more broadly, have instead made the complainants question the power and legitimacy of the mechanism itself.