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State support for enterprises

Conference.
Source:  picture alliance / Ulrich Baumgarten

Subsidies

Subsidies always require special justification and regular assessments of their effectiveness because arrangements that benefit some at the expense of the general public usually have adverse effects in the long term. To increase the transparency of subsidisation, the pressure to justify it and the scope for controlling it, the Federal Government follows subsidy policy guidelines, which constitute a voluntary commitment undertaken by the Federal Government in connection with subsidy measures under its remit. The Guidelines from 28 January 2015 require the Federal Government to conduct sustainability assessments as part of its reporting duties. The Federal Government will examine whether and to what extent these sustainability assessments are consistent with the requirements set out in the UN Guiding Principles and how enterprises receiving significant subsidies can be obligated in the future to apply the elements of due diligence described in the National Action Plan.

Guarantee instruments for the promotion of external trade

Germany assists its enterprises by providing foreign trade promotion instruments to hedge risks. These instruments include export credit guarantees, known as Hermes guarantees, to insure export transactions, federal guarantees for direct investments abroad and untied loan guarantees to protect banks against the risk of loan defaults. The Federal Government will ensure in future that human rights, which have until now been an element of the environmental and social impact assessment for these instruments, are given more consideration and a stronger profile in assessment procedures. It will compare the existing assessment procedures with the requirements for human rights due diligence set out in the National Action Plan and make adjustments where necessary. One particular priority will be measures to improve the identification of human rights risks during the assessment process.

Better information and greater transparency will draw corporate attention, even during the initiation stage of projects, to the great importance attached to human rights due diligence and to the OECD Guidelines. In particular, the Federal Government will extend its support measures for the enterprises concerned by means of information material.

In addition, plans are made toinclude human rights due diligence reports in the assessment procedures of the instruments for hedging foreign trade risks in cases where there is a strong likelihood that human rights will be seriously impacted.

The detailed procedure for assessing applications for export credit guarantees, guarantees for direct investments abroad and untied financial loans will be intensified with regard to respect for human rights; this will entail comparing the procedure with the specific requirements set out in the National Action Plan. For this, project assessments will treat human rights as a separate issue in the future. The aim here is to ensure that enterprises which avail themselves of foreign-trade promotion instruments fulfil their obligation to practise due diligence.

National Contact Point for the OECD Guidelines now the central grievance mechanism

The National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises was established in 2001 as an extrajudicial grievance mechanism. It is attached to the Federal Ministry for Economic Affairs and Energy and has the task of distributing information about the OECD Guidelines, raising awareness of them and promoting compliance with them. The OECD Guidelines for Multinational Enterprises are a code of conduct for responsible corporate behaviour in international contexts. They were developed by OECD member governments as recommendations for trade and industry and are part of the OECD Declaration on International Investment and Multinational Enterprises. The Guidelines call upon enterprises to, for example, "respect the internationally recognised human rights of those affected by their activities". The NCP examines incoming complaints, with regard to insufficient respect for human rights, among other things. When a complaint falls within its purview, it offers to mediate between the parties. In the course of the implementation of the National Action Plan, the NCP will be upgraded to be the central grievance mechanism for external trade promotion projects. Enterprises wanting to make use of foreign-trade promotion instruments are required to participate in any grievance proceedings initiated against them before the German National Contact Point.