CASE STUDY-3

A key section of OECD guidelines is the umbrella or chapeau clause that precedes the
guidelines themselves. This clause states that MNCs should adhere to the guidelines within
the framework of law, regulations and prevailing industrial relations and employment
practices, in each of the countries in which they operate. Employers have understood the
chapeau clause means compliance with local law superseding the guidelines, while trade
unions have interpreted this clause to mean that the guidelines are a supplement to national
law. The implication of this interpretation is significant: a firm could still be in violation of
the OECD guidelines even though its activities have complied with national law and practice.
Given the ambiguity of the chapeau clause and the fact that the OECD guidelines are
voluntary, it is likely that this issue will remain controversial.

1. Critically analyse the international unions in Germany and India.