The Organisation for Economic Co-operation and Development (OECD) notes that ‘export credit’ is an insurance, guarantee or financing arrangement which enables a foreign buyer of exported goods and/or services to defer payment over a period of time. Export credits are generally divided into short-term, medium-term (usually two to five years repayment) and long-term (usually over five years). Export Credit Agencies (ECAs) provide these financial services to companies that do business abroad, particularly for business activities in the Global South. Most Global North countries have at least one ECA, which is usually an official or quasi-official branch of their government.
Today, ECAs are collectively among the largest sources of public financial support for foreign corporate involvement in industrial projects in the Global South. For example, ECAs are estimated to support twice the amount of oil, gas and mining projects as do all Multilateral Development Banks such as the World Bank Group. They are thus extremely important sources of finance and insurance for the private sector. According to OECD data, in 2015 alone, ECAs in OECD member nations provided US$125 billion in credit, insurance, guarantees and interest support. ECA Watch has noted that as projects funded by ECA “are high risk due to their environmental, political, social and cultural impacts, most would not come to life without the support and financial backing of ECAs.” Therefore, as highlighted in the UN Guiding Principles on Business and Human Rights, Guiding Principle 4:
“States should take additional steps to protect against human rights abuses by business enterprises that are owned or controlled by the State, or that receive substantial support and services from State agencies such as export credit agencies and official investment insurance or guarantee agencies, including, where appropriate, by requiring human rights due diligence.”+ Read more
As highlighted in the Commentary to Guiding Principle 4 “[w]here States own or control business enterprises, they have greatest means within their powers to ensure that relevant policies, legislation and regulations regarding respect for human rights are implemented.” The Commentary to Guiding Principle 4 further highlights that:
“A range of agencies linked formally or informally to the State may provide support and services to business activities. These include export credit agencies, official investment insurance or guarantee agencies, development agencies and development finance institutions. Where these agencies do not explicitly consider the actual and potential adverse impacts on human rights of beneficiary enterprises, they put themselves at risk – in reputational, financial, political and potentially legal terms – for supporting any such harm, and they may add to the human rights challenges faced by the recipient State.
Given these risks, States should encourage and, where appropriate, require human rights due diligence by the agencies themselves and by those business enterprises or projects receiving their support. A requirement for human rights due diligence is most likely to be appropriate where the nature of business operations or operating contexts pose significant risk to human rights.”
The Committee on Economic, Social and Cultural Rights in its General comment No. 24 [page 14], also supports this approach by stating that:
“States parties should also consider the use of administrative sanctions to discourage conduct by business entities that leads, or may lead, to violations of the rights under the Covenant. Access to export credit and other forms of State support may also be denied in such circumstances, and in transnational contexts, investment treaties may deny protection to foreign investors of the other party that have engaged in conduct leading to a violation of Covenant rights.”
The 2016 OECD Common Approaches for Export Credit Agencies signed by all OECD member countries explicitly recognise the recommendations of the Guidelines, and provide that members should “promote awareness of OECD Guidelines for Multinational Enterprises among appropriate parties involved in applications for officially supported export credits as a tool for responsible business conduct in a global context.” Governments could also build in criteria associated with into bid evaluations for construction projects and public procurement criteria generally. Public finance institutions can build in conditionality measures associated with strong due diligence systems and standards into their financing terms.
Some States already take the opportunity to promote better conduct by making public support dependent on the potential recipient of support committing to respect international standards such as the OECD Guidelines for Multinational Enterprises (MNEs) or UNGPs. Examples of these are found in Norway and the Netherlands. In Norway, the Norwegian Export Credit Guarantee Agency (GIEK) “and Export Credit Norway (…) have established formal cooperation on [(Corporate Social Responsibility)] CSR. The cooperation includes human rights due diligence based on the expectations of export credit institutions set by the UN Guiding Principles, and is an integrated part of GIEK’s and Export Credit Norway’s loan and guarantee activities” [The Norwegian NAP, page 24]. In the Netherlands, under the “CSR policy on export credit insurance, both the government and companies are required to take responsibility for CSR. Companies using export credit insurance sign a declaration that they will seek to abide by the OECD Guidelines. The export credit agency Atradius DSB is responsible for carrying out a due diligence risk analysis of applications for insurance. The companies concerned are responsible for supplying the necessary information. If they are unable to do so, insurance will not be provided for the export transaction.” [The Dutch NAP, page 27].
According to EU Regulation 1233/2011, EU Member States must submit annual reports on the activities of their ECAs to the European Commission. Based on these activity reports, the Commission then submits to the European Parliament an annual review assessing ECAs compliance with the EU’s objectives and obligations, including the protection of the environment and respect for human rights.
Export credit relates to the following Sustainable Development Goals
- ECA Watch website
- OECD – List of official ECAs
- OECD – ECAs at the OECD
- OECD – Sustainable Lending and Export Credits
- OECD Information on Category A and Category B Projects since 2005 (updated 16 December 2016).
- OECD Policies, practices and experiences with regard to addressing environmental and social issues: Environmental and Social Due Diligence – (updated 16 December 2016)
- The 2016 OECD Common Approaches for Export Credit Agencies
- Committee on Economic, Social and Cultural Rights, General comment No. 24 (2017) on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities, E/C.12/GC/24, 10 August 2017
- Submission by Halifax Initiative: “Export Credit Agencies and the International Law of Human Rights”, Jan 2008
- Halifax Initiative, Both Ends, CounterCurrent, Fórum Suape and Ríos Vivos, Report: Export Credt and Human Rights: Failure to Protect., 2015
- Business & Human Rights Resource Centre – Export credit agencies
- EarthRights International, Export Credit Agencies and Human Rights Obligations, May 31,2006
- Shift Project, OECD Includes Human Rights Due Diligence in Recommendations for Export Credit Agencies, April 13, 2016