Editor's Note: Alexandru Rares Tofan recently graduated with an LLM in Transnational Law from King’s College London where he focused on international human rights law, transnational litigation and international law. He is currently an intern with the Doing Business Right project at the Asser Institute in The Hague. He previously worked as a research assistant at the Transnational Law Institute in London on several projects pertaining to human rights, labour law and transnational corporate conduct.

The Romanian Institute for Human Rights (‘Institutul Român pentru Drepturile Omului’, hereinafter RIHR) was established on 30 January 1991 on the basis of Law No 9/1991. It is an independent public body that has as its main purposes the promotion of human rights education and the monitoring of compliance with human rights in Romania (see Art. 2). The duties of the institute include carrying out research, disseminating information, organising events and conferences for capacity-building and awareness raising, advising the legislative branch on human rights aspects of new enactments, and reporting on compliance with human rights (see Art. 3). The RIHR’s status as a national human rights institution is currently being transferred to the People’s Advocate Institution (see here), which is an ombudsman institution with general jurisdiction. The process for obtaining accreditation from GANHRI is currently in its incipient stages pending the approval by the Senate of Law 382/2018 concerning the amendment of the law governing the People’s Advocate Institution. In view of this development, this article undertakes a forward-looking approach by analysing RIHR’s current efforts on business and human rights as well as any foreseeable changes.

This article analyses two types of actions in order to observe the extent to which the RIHR has assumed its role in promoting access to remedy in business and human rights cases. According to the 2010 Edinburgh Declaration of the International Co-ordinating Committee of National Institutions for the Promotion and Protection of Human Rights (ICC), the participation of NHRIs in the remedial process may be either direct or indirect. As stated above however, the RIHR lacks a complaints mechanism. For this reason, this article will adopt a forward-looking analysis by looking at the complaint mechanism of the People’s Advocate Institution (PAI) to ascertain whether this new procedure complies with the vision for NHRIs under the UNGPs. As will be shown, the field of business and human rights has not been at the top of the RIHR’s agenda. Worryingly, the forthcoming transfer of NHRI status to PAI may in fact represent a step back in this sense.

The Paris Principles (PP) dictate that national human rights institutions may directly participate in providing access to justice by hearing and considering complaints. While this does not fall in the competences of the RIHR, it is interesting to analyse whether its successor’s complaints mechanism is aligned with the PPs in its current form. According to the current legislative proposal, the PAI would have the authority to decide over complaints alleging any violation of human rights but only to the extent that the respondent is a public authority, including public companies (see Art. 11 (c)). Should it satisfy itself that a right has been breached, it may request the public authority to take compensatory measures and it may award reparation.

Restricting the complaints mechanism’s jurisdiction to cover only public authorities severely limits its usefulness in business and human rights cases. It means that victims of corporate human rights abuses by private companies will not able to enjoy a routinized alternative to instituting legal proceedings. This limited jurisdictional reach also obstructs the fulfilment of the institution’s role as a mediatory or conciliatory body in business and human rights cases. While it is commendable that the PAI may handle cases alleging violations of any human rights, the ratione personae jurisdiction is too limited to foster the achievement of its envisioned purposes under the UNGPs. Extending the scope of the complaints mechanism to cover private persons as offenders would enable its alignment with both the Paris Principles and the UNGPs. It would also in all likeliness lead towards the bettering of its accreditation status under the GANHRI (the RIHR was previously given C-status).

As to indirect participation, the RIHR has only marginally addressed the field of business and human rights in its activities. For instance, in 2014 and 2015, it has conducted research and organised debates based on the UNGPs, the European Strategy for CSR and the Action Plan of the European Network of NHRIs. These debates included talks of a national action plan in which to set out the priorities of the Romanian government in this field. The RIHR has further held separate conferences on business and human rights (such as the one held together with the UNESCO Office for Human Rights, Democracy, Peace and Tolerance) or as part of its annual conferences (see the 2016 conference where business and human rights was treated as a new challenge to the field of human rights). The RIHR is also a founding member of the CLARITY project alongside eleven other national human rights institutions from the EU. This project aims to raise awareness and enhance the general public’s knowledge about their fundamental rights and related enforcement mechanisms. Since March 2018, CLARITY has begun work on a project focusing on access to remedy improvements in business and human rights cases. On the other hand, the activities of the People’s Advocate Institution do not currently encompass the field of business and human rights at all. This means that the sporadic involvement of the Romanian NHRI in the field of business and human rights will in all likelihood diminish in the future.

To conclude, the field of business and human rights has not been at the top of the RIHR’s agenda in its almost thirty years of activity. Nor is this likely to change under the auspices of its successor – the People’s Advocate Institution. The latter institution does not have a mandate to handle human rights complaints against private companies, and the field of business and human rights is not in its sight. This forthcoming transfer of responsibility may therefore, at least in the short run, not be a good news for access to remedy in business and human rights cases in Romania.

Editor's note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. Alongside her studies, she is working as student research assistant at the Institute for International and Foreign Private Law in Cologne. Since September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project.

In Part II of this blog series, I intend to outline the different proposals for a Lieferkettengesetz. First, the Initiative Lieferkettengesetz’s model law, secondly the proposal submitted by the Ministry for Labour and Social Affairs and the Ministry for Economic Cooperation and Development, and lastly, I will present the amendments pushed by the business sector and the Ministry for Economic Affairs and Energy.

Initiative Lieferkettengesetz model law

The Initiative Lieferkettengesetz, a consortium of over 110 NGOs, presented their model law in early 2020. It draws inspiration from the ECCJ’s position paper “Key Features of Mandatory Human Rights Due Diligence.”

The scope of application of the model law covers companies with over 250 employees. However, if a business operates in a high-risk sector, it would have to implement human rights due diligence into its global supply chain even if it employs fewer than 250 people. Examples of high-risk sectors include the manufacturing of arms, the chemical and automotive industry, financial services and many others. Initiative Lieferkettengesetz also advocates for certification and auditing services to be included in the list of sectors that pose great risk for human rights and the environment; this is because this sector lacks adequate regulation, is prone to corruption and errors – with often devastating consequences.

The Initiative Lieferkettengesetz demands that not only companies that have their seat in Germany be covered by Supply Chain Regulation. Instead, all companies that show a ‘genuine link’ to Germany should be included in the scope of application. They argue for the clause to be drafted similarly to sec 54(12) Modern Slavery Act 2015, adding the following clarification: The company must either have an administrative seat, permanent establishments (i.e. branches, factories, storage facilities etc.), permanent representatives on German territory or provide German companies with some form of service at least twice a year. Foreign companies, the shares of which are sold on the German stock market, should also be covered by the model law. Initiative Lieferkettengesetz explicitly excludes mere investments in Germany.

In outlining the due diligence requirement, Initiative Lieferkettengesetz builds on the individual aspects set out in the UNGPs: (1) policy statement; (2) risk analysis; (3) countermeasures; (4) reporting; (5) grievance mechanism.

The risk analysis should be carried out once a year at the minimum. Ideally, it ought to be carried out before every strategic decision. It encompasses factual and potential risks to human rights and the environment. Risks need to be assessed according to how likely they are to occur, the extent of potential damage caused, the importance of the legal interest that needs to be protected, and the scope for restitution. On the basis of this risk analysis, businesses should implement countermeasures to prevent or mitigate any harm to human rights and the environment caused by their business activity.

The scope of the duty covers human and labor rights as well as environmental standards. The model law explicitly refers to the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, nine ILO Conventions, and four UN Conventions. Where company’s business activity is linked to production of arms or surveillance technologies, the scope of duty should also cover the Geneva Conventions with their additional protocols. The necessary standard of care to be adopted in the due diligence analysis hinges upon the term ‘appropriateness’. The ‘appropriateness’ of a measure depends on size, business activity, nexus between business activity and risk, and the severity of the threat to human rights and the environment. There is not one ready-made solution for every risk occurring in supply chains; that is why the model law provides some flexibility to companies in order to determine the most efficient measure that needs to be implemented. Initiative Lieferkettengesetz emphasizes that it is not enough to take part in multi-stakeholder sectorial initiatives or outsource their obligation to auditing or certification services in order to discharge the duty to implement countermeasures. Moreover, companies should internally document their risk analysis and countermeasures and should also regularly submit reports to the Government.

Initiative Lieferkettengesetz proposes an array of sanctions in case of breach of duty: fines, exclusion from public procurement and foreign trade promotion, and crucially, civil liability.

Civil liability in German law is based on § 823(1) of the Civil Code (BGB), which protects narrowly interpreted legal interests –bodily integrity, health, liberty, property and ‘others’, i.e. privacy.  The Initiative Lieferkettengesetz proposes to add a clause in the model law which states that human and labor rights, found in the treaties ratified by Germany, ought to be integrated to the legal interests protected by § 823(1) BGB. Where necessary, they should fall under ‘other’.

German scholars often criticize that human rights do not have any legal ‘contours’; that they are too vague to justify civil liability. The Initiative Lieferkettengesetz counterargues by comparing them to other ‘vague’ legal interests such as privacy. In order to determine if someone’s right to privacy was breached, courts engage in an analysis of proportionality: the finding that a breach of privacy occurred depends on how likely, severe, foreseeable and avoidable any harm caused was.

Considering how difficult it is for the claimant to gather evidence in the case of human rights atrocities occurring in global supply chains, Initiative Lieferkettengesetz suggests that the claimant should benefit from a reversed burden of proof: It ought to be upon the company to prove that the harm to human rights or the environment was neither foreseeable nor avoidable by implementing appropriate measures.

Crucially, the supply chain law should be characterized as overriding mandatory provision in line with Article 16 Rome II. As a result, even if rules of private international led to the application of foreign tort law, the provisions of the Lieferkettengesetz would still be given effect to.

Government’s position paper (Eckpunkte)

During their party conferences in November and December 2019, both the CDU (Christian Democratic Union) and the SPD (Social Democratic Party) came out in support for the Lieferkettengesetz. Ministers Hubertus Heil (Minister of Labour and Social Affairs, SPD) and Gerd Müller (Minister for Economic Cooperation and Development, CSU [Christian Social Union, the CDU’s Bavarian affiliate]) took it upon them to draft the government’s position paper (Eckpunkteplan) which would eventually serve as basis for any further draft.

They intended to present their paper to the public on 10 March 2020 and had already scheduled a press conference. After pressure from the Chancellery (Ministry that supports Chancellor Merkel in the execution of her duties), which in turn appeared to have been pressured by the business sector, they cancelled the press conference.

Their internal position paper, however, leaked in February 2019, causing outrage among German business representatives. It was portrayed as ‘harmful’ and based on ‘arbitrary monitoring’. The president of the Federal Employers’ Association (Bundesvereinigung der Deutschen Arbeitgeber) even exclaimed that with such a law, he would already have ‘one foot in prison’.

In June 2020, the two Ministries published a new version of the position paper. If one compares the position paper to the model law presented by Initiative Lieferkettengesetz, it becomes clear that Heil and Müller opted for a watered-down version of the law. The scope of application is limited to companies with over 500 employees. It does not account for smaller businesses, which operate in particularly high-risk industries. The Lieferkettengesetz will only be applicable to companies that either have their seat in Germany or which can show a ‘strong link’ to Germany. The position paper further clarifies that the requirement of a ‘strong link’ is fulfilled if businesses make strategic decisions in Germany; mere business activity does not suffice.

Due diligence comprises four aspects: (1) risk analysis; (2) effective countermeasures; (3) grievance mechanism; (4) reporting. Just like with the model law, companies will have to analyze how their business activity affects human rights internationally. However, the Eckpunkteplan does not refer to human rights treaties. Instead, it points to human rights risks: forced labor, child labor, discrimination, freedom of association, workers’ rights, violation of property rights. Protection is limited to the particular legal interests enshrined in § 823(1) BGB (bodily integrity, health, liberty, property and privacy). Crucially, environmental damage and corruption are in themselves not part of the risk analysis; they merely constitute factors to consider. Furthermore, the companies’ human rights due diligence does not include any obligation to engage with relevant stakeholders. 

Claimants do not benefit of a reversed burden of proof. Commentators further criticize that the position paper includes a possibility for companies to limit their liability to cases of gross negligence or intent by participating in state-accredited sectoral initiatives. This is considered regrettable because sectoral initiatives such as the ‘Green Button’ have proven to be of limited impact. Such a provision opens a way for businesses to relatively easily escape liability altogether. Lastly, the position paper provides for the law to come into force three years after it had been passed. 

The position paper should have been presented to the Cabinet in March 2020, but the Cabinet’s meeting was postponed due to Covid. Peter Altmaier, Minister of Economic Affairs and Energy (CDU), does not seem to be in a rush to discuss the Eckpunkteplan. He blocked another meeting in August. This is particularly problematic because proper procedure demands that the position paper is discussed before drafting begins. If Cabinet does not discuss the position paper this autumn, there will be no possibility to adopt the Lieferkettengesetz before the general election in autumn of 2021.

Even if Altmaier cannot postpone its passing, he at least tries to ensure the law is further watered down beyond recognition. Altmaier forcefully demands that the scope of application is limited to companies with over 5,000 employees – of which only 250 exist in Germany. While one can argue that the number of employees is open to compromise, there are aspect of the law that are non-negotiable. Altmaier strongly opposes any imposition of civil liability and exclusion from public procurement. NGOs fear that by giving in to these demands, the Lieferkettengesetz will become toothless.

The current political situation shows how much power the Ministry of Economic Affairs and Energy holds. Altmaier comes close to having a veto right – even though officially, all ministries carry equal weight in the negotiations. This is particularly dangerous because, as official documents show, the Ministry of Economic Affairs and Energy has close personal ties to industry representatives and business lobby groups.

Nevertheless, there are reasons to remain hopeful. Looking at the political and societal context prevailing in France before the loi de vigilance was passed, one can draw many parallels to the situation in Germany: Even though Altmaier seems to believe that global markets can self-regulate and that voluntary commitments are enough, many other Ministries and, crucially, Chancellor Merkel, do not. Furthermore, there is a strong NGO alliance mobilizing the German public in favor of binding legislation – and it is currently supported by 76% of the public. Public campaigns, protests and conferences put pressure on politicians. Thanks to the French campaigners in the early 2010s, it is now clear that binding legislation is achievable. Despite the lack of cooperation from the Ministry of Economic Affairs and Energy, a Lieferkettengesetz is as close as it has ever been.

Conclusion

There are reasons to believe that the Lieferkettengesetz is not only feasible, but also in sight. While NGOs provided a very ambitious and thorough model law, the government’s position paper would also constitute a step into the right direction – at least if Altmaier and the Ministry of Economic Affairs and Energy fail in bending the text further towards businesses’ needs.

In order for the Lieferkettengesetz to be passed this term, Cabinet will need to discuss the position paper this autumn. Timing is of particular importance: While Chancellor Merkel has come out in support of binding legislation, it is unclear whether her successor will do so, too.

The German debate has also important repercussions at the European level, as Germany is currently occupying the Presidency of the Council of the EU. In this context, the German government has publicly committed to pushing for substantive, cross-sectoral and mandatory human rights due diligence regulation. If the German public keeps the pressure on and the political stars align, 2020 could even be remembered as the birth year of a new brand of corporate responsibility made in Germany.

Editor's Note: Alexandru Rares Tofan recently graduated with an LLM in Transnational Law from King’s College London where he focused on international human rights law, transnational litigation and international law. He is currently an intern with the Doing Business Right project at the Asser Institute in The Hague. He previously worked as a research assistant at the Transnational Law Institute in London on several projects pertaining to human rights, labour law and transnational corporate conduct.

The national human rights institution of the Netherlands is the College voor de Rechten van de Mens (i.e. ‘the Netherlands Institute for Human Rights’). It was established on 1 October 2012 with the entering into force of the Netherlands Institute for Human Rights Act of 24 November 2011 as supplemented by the Explanatory Memorandum (EP). It is an independent public body whose mission is to promote, monitor and protect human rights in practice, policy and legislation (see NIHR Act s.1 (3)). For these purposes, it enjoys a wide competence that spans the full breadth of human rights whether stemming from national or international legislation (see EP at page 7). The Institute’s duties include conducting investigations, reporting and making recommendations, advising, providing information, encouraging research, pressing for the observance of internationally recognised human rights, and assessing any complaints alleging violations that it may have received (see NIHR Act s.3). The types of complaints it may entertain are nevertheless rather limited – the Institute may only investigate claims alleging discrimination or unequal treatment (see NIHR Act s.10 (1)).

This article analyses two types of actions in order to assess the extent to which the Institute has assumed its role in promoting access to remedy in business and human rights cases. According to the 2010 Edinburgh Declaration of the International Co-ordinating Committee of National Institutions for the Promotion and Protection of Human Rights (ICC), the participation of NHRIs in the remedial process may be either direct or indirect. As will be shown, the Dutch NHRI is envisioned as an institution that leans more on indirect rather than direct participation in providing access to remedy.

In terms of direct participation, the complaints procedure of the Netherlands Institute for Human Rights has a rather narrow scope. Section 10 of the Act stipulates that the Institute may conduct investigations into allegations of violations in so far as they relate to discrimination or unequal treatment under the Equal Treatment Act, the Equal Treatment (Men and Women) Act or Article 646, Book 7 of the Dutch Civil Code. Although the complaint may be submitted against any type of Dutch-based company (see S. 10 (2) (a)–(e)), the limited subject matter jurisdiction prevents the Institute from being a one-stop shop for business-related human rights abuses. This is especially true for transnational corporate misconduct, which normally entails cross-cutting/intersectional human rights abuses. In the same vein, the Institute may only bring a legal action before the courts if this claim relates to discrimination under the aforementioned legislation (see S.13). The Memorandum attached to the Act explains that ‘[…] [g]iven the legal protection already available in the Netherlands and the possibility of lodging a complaint with an ombudsman the government sees no good reason to give the Institute its own jurisdiction to hear legal actions in the broad field of human rights […]’ and that ‘[…] [i]n response to a complaint, the National Ombudsman may investigate whether or not the state has acted properly […] To prevent overlapping it is therefore undesirable for this responsibility to be given to the Institute […]’. The National Ombudsman may nevertheless only exercise authority over public bodies (see Article 1a). In turn, this means that complaints lodged against private actors arguing violations of human rights other than discrimination escape both the Institute and the National Ombudsman. While it is true that the general legal protection available in the Netherlands would apply in those cases, the role of the NHRI as a complementary grievance mechanism is in this way restricted. Under the UNGPs, NHRIs are supposed to offer an alternative to instituting legal proceedings. The rationale behind this is that bringing a legal action may involve many obstacles for the victim such as prohibitive costs, imbalance of expertise between parties, lack of standing for foreign nationals, and protracted duration. Conversely, an NHRI complaints mechanism is perceived as more accessible, expeditious and culturally-appropriate.[1] The limited subject matter jurisdiction of the Institute in handling complaints may therefore be seen as impeding its full direct participation in providing access to remedy.

As to indirect participation, one of the main tasks of the Institute is to promote and monitor human rights (see S.3). The Institute has a rather robust presence in the area of business and human rights in the Netherlands and performs an important role in promoting human rights in this policy area. For instance, the Institute drew up a comprehensive response to the National Action Plan on Business and Human Rights put forward by the Dutch government in December 2013. This response entailed an in-depth examination of the plan’s compatibility with the UNGPs as well as advice and recommendations for its improvement. Notably, it included a rights-based approach in that it looked at the issue of access to remedy from the victims’ perspectives. The Netherlands Institute for Human Rights further advised the government on the proposed law on child labour in supply chains, the human rights implications of the new model bilateral investment treaty, and it partook in the discussions regarding the national sector covenants (e.g. the Agreement on Sustainable Garments and Textile). It further participates in the annual UN Forum on Business and Human Rights alongside other stakeholders. Furthermore, the cross-cutting nature of business-related human rights abuses means that they permeate the Institute’s work in other policy areas. For instance, the Institute’s work on the right to housing implies the usage of the UNGPs as a framework to ascertain the human rights responsibilities of housing corporations. In the same vein, one of the four themes from the Institute’s Strategy Plan for 2016-2019 is discrimination and stereotyping in the labour market. This necessarily involves an assessment of the human rights obligations of corporations. The Institute has therefore assumed a firm standing in terms of indirect participation in the implementation of the UNGPs. It promotes education, monitors human rights implementation, undertakes capacity-building exercises, advises and issues recommendations. Nevertheless, one cannot help but notice the absence of business and human rights from the Institute’s Strategic Plan for 2016-2019.

To conclude, the Netherlands Institute for Human Rights seems to have only partially assumed the role envisioned for it under the UNGPs as a national human rights institution. On the one hand, it did establish itself as a focal point for expertise on human rights issues in the Netherlands and has taken important steps to promote and advise on issues of business and human rights. On the other hand, a broader mandate would conform more to the second leg of the Paris Principles and to the spirit and aim of the Third Pillar of the UNGPs – the protection of human rights by receiving, investigating and resolving complaints.

[1]           UN Human Rights Council, ‘Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises – Protect, Respect and Remedy: A Framework for Business and Human Rights’ (7 April 2008) A/HRC/8/5 at page 25.

Editor's Note: Catherine Dunmore is an experienced international lawyer who practised international arbitration for multinational law firms in London and Paris. She recently received her LL.M. from the University of Toronto and her main fields of interest include international criminal law and human rights. Since October 2017, she is part of the team of the Doing Business Right project at the Asser Institute.

Background

At the United Nations Forum on Business and Human Rights from 27-29 November 2017 in Geneva, discussions focused on the central theme of Realizing Access to Effective Remedy. With an increasing focus on this third pillar of the United Nations Guiding Principles on Business and Human Rights, a working group of international law, human rights and conflict management specialists (Claes Cronstedt, Jan Eijsbouts, Adrienne Margolis, Steven Ratner, Martijn Scheltema and Robert C. Thompson) has spent several years exploring the use of arbitration to resolve business and human rights disputes. This culminated in the publication on 13 February 2017 of a proposal for International Business and Human Rights Arbitration. On 17 August 2017, a follow-up Questions and Answers document was published by the working group to address the principal questions raised about the proposal during the three-year consultation with stakeholders. Now, a drafting team is being assembled, chaired by Bruno Simma, to prepare a set of rules designed specifically for international business and human rights arbitration (the Hague International Business and Human Rights Arbitration Rules) in consultation with a wide range of business and human rights stakeholders. Once drafted, the rules will be offered to the Permanent Court of Arbitration and other international arbitration institutions and could be used in arbitration proceedings managed by parties on an ad hoc basis.

Introduction

Part 1 of this three-part blog series gave an overview introduction to the proposal for international business and human rights arbitration. Part 2 focused on the potential advantages of using international arbitration to resolve such disputes, as well as the substantial challenges the proposal will face in practice. This Part 3 now provides a case study of the Accord on Fire and Building Safety in Bangladesh’s binding arbitration process. More particularly, it will provide (1) a brief background to the Accord on Fire and Building Safety in Bangladesh, as well as (2) an analysis of its binding arbitration process, before (3) discussing the arbitrations brought by IndustriALL Global Union and UNI Global Union against two global fashion brands under the Accord on Fire and Building Safety in Bangladesh.

1.     Background to the Accord on Fire and Building Safety in Bangladesh

The Accord on Fire and Building Safety in Bangladesh (the Accord) is a five year independent, legally binding agreement between global brands, retailers and trade unions created in the immediate aftermath of the Rana Plaza building collapse, which led to the death of more than 1,100 people and injured over 2,000. Its purpose is to create a safe and sustainable Bangladeshi Ready Made Garment Industry in which no textile worker need fear fires, building collapses or other accidents that could be prevented with reasonable health and safety measures. The Accord was signed on 15 May 2013 and in June 2013 an implementation plan was agreed, leading to the incorporation of the Bangladesh Accord Foundation in the Netherlands in October 2013. The agreement notably consists of six key components:

• A five year legally binding agreement between brands and trade unions to ensure a safe working environment in the Bangladeshi Ready Made Garment Industry.
• An independent inspection program supported by brands in which workers and trade unions are involved.
• Public disclosure of all factories, inspection reports and corrective action plans.
• A commitment by signatory brands to ensure sufficient funds are available for remediation and to maintain sourcing relationships.
• Democratically elected health and safety committees in all factories to identify and act on health and safety risks.
• Worker empowerment through an extensive training program, complaints mechanism and right to refuse unsafe work.

To date, the Accord has been signed by over 200 apparel brands, retailers and importers from over twenty countries in Europe, North America, Asia and Australia, as well as two global trade unions, eight Bangladesh trade unions and four non-governmental organisation witnesses. As of October 2017, the Accord’s inspectors have identified thousands of safety hazards, but nearly 80% of workplace dangers discovered in the original round of inspections have been remediated whilst over 600 factories have completed 90% or more of the necessary remediation works.

In June 2017, a second term was agreed for the Accord which will enter into effect when the current agreement ends in May 2018 (the 2018 Accord), expiring in 2021. The concept is then for the work to be handed over to a national regulatory body, supported by the International Labor Organization, to be carried forward from that point.

2.     The Accord on Fire and Building Safety in Bangladesh’s binding arbitration process

Article 5 of the Accord contains the agreement’s dispute resolution mechanism, which includes appeal to a final and binding arbitration process. It states that:

“Any dispute between the parties to, and arising under, the terms of this Agreement shall first be presented to and decided by the SC [Steering Committee], which shall decide the dispute by majority vote of the SC within a maximum of 21 days of a petition being filed by one of the parties. Upon request of either party, the decision of the SC may be appealed to a final and binding arbitration process. Any arbitration award shall be enforceable in a court of law of the domicile of the signatory against whom enforcement is sought and shall be subject to The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention), where applicable. The process for binding arbitration, including, but not limited to, the allocation of costs relating to any arbitration and the process for selection of the Arbitrator, shall be governed by the UNCITRAL Model Law on International Commercial Arbitration 1985 (with amendments as adopted in 2006)”.

A number of critiques have been levied of this arbitration mechanism. For instance, Roger Alford highlighted that the mechanism contains no governing law clause and no seat of arbitration. Accordingly, if a party were to refuse to arbitrate then there is no evident national court in which the claimant might file a motion to compel arbitration. Additionally, although reference is made to the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 1985, no specific arbitration rules are selected. Another constraint is that only disputes arising under the terms of the Accord are subject to arbitration, which may restrict the mechanism’s scope to breach of contract and potentially exclude disputes relating to third-party injuries. The article also appears on one reading to limit arbitration to an exclusively appellate function, with the arbitral tribunal only able to review the Steering Committee’s decision for legal or factual errors as opposed to considering the case afresh. Finally, whilst arbitration awards rendered following an appeal of the Steering Committee decision are subject to enforcement under the New York Convention, there is no stated procedure for directly enforcing the Steering Committee decision and creating binding obligations for the parties without recourse to arbitration.

Article 3 of the 2018 Accord contains some notable alterations to the agreement’s dispute resolution mechanism, stating that:

“Any dispute between the parties to, and arising under, the terms of this Agreement shall be presented to and decided by the SC.

The Steering Committee shall adopt a revised Dispute Resolution Process (DRP) to specify the timelines and procedures involved when disputes are presented to the SC, with the aim to 3 establish a fair and efficient process. The decision making process of the SC shall be supported by a member of Accord secretariat who will perform an initial investigation for the parties and present facts and their recommendations.

The DRP will also incorporate the opportunity for parties to participate in a mediation process in order to make arbitration unnecessary where there is no resolution of the dispute by the SC. Upon request of either party, the decision of the SC may be appealed to a final and binding arbitration process. Any arbitration award shall be enforceable in a court of law of the domicile of the signatory against whom enforcement is sought and shall be subject to The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention), where applicable. The process for binding arbitration, including, but not limited to, the allocation of costs relating to any arbitration and the process for selection of the Arbitrator, shall be governed by the UNCITRAL Arbitration Rules (as in its last revision) unless otherwise agreed by the parties. The arbitration shall be seated in The Hague and administered by the Permanent Court of Arbitration”.

By specifying a seat in The Hague and administration by the Permanent Court of Arbitration, the 2018 Accord’s dispute resolution article addresses the previous Accord’s silence on arbitral institution and seat of arbitration. It notably also incorporates a mediation process into the dispute resolution mechanism, providing parties with an alternative to arbitration proceedings. However, a number of lacunas remain in the 2018 Accord’s dispute resolution mechanism, leaving questions as to the practical implementation of its binding arbitration process.

3.     IndustriALL Global Union and UNI Global Union’s arbitrations against two global fashion brands under the Accord on Fire and Building Safety in Bangladesh

In July and October 2016, IndustriALL Global Union and UNI Global Union, non-governmental labour organisations based in Switzerland, commenced arbitrations against two global fashion brands under the Accord and the UNCITRAL Arbitration Rules 2010. The claims include that the fashion brands failed to compel suppliers to remediate facilities within the Accord’s deadline and negotiate commercial terms to make it financially feasible for their suppliers to cover the costs of remediation. The Claimants sought a declaration that the fashion brands violated their Accord obligations alongside a contribution to remediation costs.

Subsequently, the Parties in both PCA Case No. 2016-36 and PCA Case No. 2016-37 agreed that while remaining formally distinct, the two cases would be heard by the same tribunal. The Parties agreed that the seat of the arbitrations would be The Hague, with the Secretary-General of the Permanent Court of Arbitration acting as appointing authority. The Tribunal, composed of Professor Hans Petter Graver, Mr Graham Dunning QC and presiding arbitrator Mr Donald Francis Donovan, was formally constituted on 3 February 2017.

The Tribunal issued its Procedural Order No. 1 on 19 April 2017 which dealt with, amongst other matters, the complex issues of transparency and confidentiality discussed in Part 2 of this blog series. Clause 15 of Procedural Order No. 1 notably cited the UNCITRAL Arbitration Rules 2010 for authority that:

• Any hearing would be held in camera unless the parties agreed otherwise (article 28(3)).
• Any award would be made public only with the consent of all parties or where and to the extent disclosure is required of a party by legal duty, to protect or pursue a legal right or in relation to legal proceedings before a court or other competent authority (article (35(2)).

Accordingly the Tribunal confirmed its direction that all details of the proceedings, including that they were pending, be kept confidential pending an agreement or ruling on confidentiality.

The Respondents raised challenges to the admissibility of the claims on the basis that the pre-conditions to arbitrate under Article 5 of the Accord had not been met, and even questioned the Article’s validity as a mechanism to arbitrate. They further argued that because the deadlocked Steering Committee did not produce a majority decision, there was no final decision which could be appealed to a final and binding arbitration process. The Respondents also argued that the term ‘appealed’ in Article 5 of the Accord expressed a clear and unambiguous intent to limit a tribunal’s role to that of an appellate body, providing simply an additional layer of scrutiny as opposed to a de novo appraisal.

Subsequently on 4 September 2017, the Tribunal issued Procedural Order No. 2 containing its Decision on Admissibility Objection and Directions on Confidentiality and Transparency. The Tribunal unanimously rejected the Respondents’ interpretation, finding that the pre-conditions to arbitrate had indeed been met. It found that the Steering Committee “went through a deliberative process and arrived at a ‘decision’ for each charge within the meaning of Article 5” of the Accord. The Tribunal pointed to the “pointless consequences” that would arise from following the Respondent’s argument that the claims were inadmissible due to the deadlocked Steering Committee, explaining that:

• “At this point, there is nothing further that the Claimants could do to pursue their petition except to refile it with the Steering Committee. But that body has already given it the consideration contemplated by Article 5. Hence, the only way to release the petition from Steering Committee limbo would be for one of the union or brand representatives – presumably here, one of the union representatives – to ‘cross the floor’ and vote to reject it, which would then produce the majority vote that the Respondents contend is the condition to invoking arbitration. The Accord signatories could not have intended to promote that kind of gamesmanship as the only way to access arbitration in the event of an evenly divided Steering Committee. Equally, they could not have intended to deny a claimant access to arbitration in the event of a tie but make it available if the claimant lost by a majority or unanimous vote”.

It also emphasised that the term ‘appealed’ on its own did not bring any limitation to a body’s scope of review. Rather, the Tribunal held that particularly given the “non-legal, industry-based character of the first level of decision-making” by the Steering Committee, “there is every reason to believe that the Accord signatories considered that the ‘arbitration’ to which that initial decision could be ‘appealed’ would involve the full fact-finding and law-deciding authority of standard arbitral processes”.

The Tribunal accordingly held the claims admissible and within its jurisdiction. The Permanent Court of Arbitration’s press release noted that the case would proceed to a merits phase, with hearings scheduled for the first half of 2018.

The Tribunal also issued directions on confidentiality and transparency. It noted the particularity of the case, as neither “a classic ‘public law’ arbitration” involving a State nor a “traditional commercial arbitration” between private parties. In its deliberations, the Tribunal accounted for the interest in the Accord from the public, numerous signatories and other stakeholders, but also the need to protect the business information and reputational interests of the fashion brands. To strike a balance between these competing interests, the Tribunal ordered that some basic information about the arbitration’s existence and progress be disclosed but that the identity of the Respondents be kept confidential. Pursuant to a protocol developed in consultation with the Parties, redacted copies of certain documents might be published, including awards, decisions and orders of the Tribunal.

In relation to one of these two Accord arbitrations, on 15 December 2017 IndustriALL Global Union announced that the Parties had reached a settlement agreement. The settlement will ensure that the fashion brand’s supplier factories are remediated and that substantial funds are available for that remediation work consistent with the Accord.

Conclusions

The Accord on Fire and Building Safety in Bangladesh represents a ground-breaking accountability structure and, despite its notable deficiencies and uncertainties, its arbitration process provides a binding enforcement mechanism unique in its resolution of human rights disputes. The arbitrations brought by IndustriALL Global Union and UNI Global Union under the Accord presented the first tests of this mechanism. The Tribunal’s unanimous decision in holding the claims admissible bolstered its credibility, whilst it also acknowledged the challenges arising when adjudicating on disputes of a hybrid nature involving public interests and private concerns. The Accord’s binding arbitration process, as well as the ongoing arbitration proceedings, will undoubtedly be of significant interest to the business and human rights community as a promising example of an alternate means to resolve business and human rights disputes. The working group and drafting team must both reflect and build upon the Accord’s arbitration process as they seek to create strong, binding rules for arbitrating business and human rights disputes.