The EC’s draft ban on products made using forced labour: Key measures to guarantee remediation for victims
I am very pleased to host two blog pieces which reflect on the 10 years which have passed since Rana Plaza as well as offering thoughts as to the way forward. The first one, by Rubana Huq was posted here. The second one, by Claire Methven O’Brien and Amy Weatherburn focus on the remedy gap in the Draft Regulation proposed by the EC.
These blog pieces were commissioned and edited by Sandhya Drew and Felogene Anumo for the Blog of the Business and Human Rights Journal but an IT blip on the CUP website is delaying publication, and so I have seized this opportunity. These pieces will be crossposted by the BHRJ Blog too at a later date.
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Claire Methven O’Brien and Amy Weatherburn
In 2022, the European Commission (EC) proposed a new Regulation to ban products made using forced labour from the EU market. In this post, we highlight the absence of provisions in the draft Regulation to guarantee remedies for victims, and put forward five remediation measures that could be introduced to address this gap.
The EC’s proposed ban on products made using forced labour in outline
The EC’s proposal seeks to prevent goods made with forced labour from circulating on the EU market. The draft Regulation would hence empower Member State authorities, where there are indicators of forced labour in the supply chain, to investigate products and businesses (Articles 4-5) and conduct checks and inspections inside as well as outside the European Economic Area. Where forced labour is implicated in their production, goods can be withheld or disposed of (Article 6) and penalties imposed for non-compliance (Article 30). Additional EU-level measures aim to promote the law’s effectiveness. These include an EU database of forced labour risk areas and products to supply data to guide investigations and checks (Article 11) and guidance (Article 23). In terms of checks and balances, enforcement action against businesses is to be subject to review and appeal before national courts.
Remedies for forced labour victims in the draft EU Regulation: a crucial omission
Despite its prohibition in international law and its designation as one of the five fundamental principles and rights at work, forced labour is on the rise globally, with 28 million victims worldwide, 86 % in the private sector and most women. Human rights standards, including those binding on the EU, demand that individuals who fall victim to forced labour must be remediated. Remedies must be sufficient and certain in practice and context-specific, with reference to victims’ individual circumstances. While these rules generally relate to forced labour occurring within a state’s jurisdiction, the UN Guiding Principles on Business and Human Rights (UNGPs) and Council of Europe standards affirm the need for ensure remedy also in cross-border and value chain settings.
It is striking, then, that the EC’s proposed Regulation omits measures that would secure remedies for victims of forced labour. As is well-known, victims of forced labour face extreme difficulties in securing remediation, facing obstacles such as trauma, precarity, resource constraints, language barriers, lack of rights awareness and risks of reprisals. As remarked also by stakeholders, this lack of remedy perpetuates injustice, undermines the rule of law, exacerbates risks of re-victimisation and hence stands to frustrate the policy goals of the draft Regulation as well as broader EU and international human rights and sustainable development objectives.
Fixing the EU Regulation’s remedy gap: A package of proposals
The European Parliament is currently developing its position on the EC’s draft forced labour Regulation. There is therefore still time and opportunity to fix the failure of the EC’s draft to advance remedy for forced labour victims. As we analysed in our recently presented Briefing for the European Parliament, this goal might be promoted through the following mechanisms.
First, the Regulation should explicitly affirm the goal of preventing and remediating harm for victims. What after all is the point of EU legislation in this area, if not redressing the affront to human dignity and significant harm to human beings inflicted via exploitative labour practices?
Second, the draft Regulation should require economic operators to provide evidence of remediation as a condition of having bans or restrictions lifted. Such evidence could relate to, for example, financial and non-financial compensation; restitutionary measures; formal apologies or future-oriented preventative measures or guarantees of non-recurrence.
Third, the proposed EU Regulation could direct fines and administrative penalties into a trust fund for victims. This could then be drawn on to secure remediation in cases where perpetrators cannot be identified or fines enforced, well known obstacles to recuperating compensation where it has been awarded. Such a fund could draw lessons from and coordinate with existing initiatives, such as the UN Voluntary Trust Fund on Contemporary Forms of Slavery and Alliance 8.7.
Fourth, the foreseen Union Network Against Forced Labour Products (Article 24) should be leveraged to involve stakeholders in identifying cases of forced labour as well as monitoring and following up on the implementation of remediation. The network could also facilitate stakeholders in the process of evidence gathering for investigations as this can be a burdensome task for organisations with limited resources given the covert character of forced labour practices, and can dissuade them from pursuing legal action that would hold businesses accountable for forced labour practices. Given the latter, competent authorities should also have a duty to identify and inform potential victims, or their representatives, of the right to remediation in the course of investigations or remedial action.
Fifth, the Regulation should be articulated with other controls on market access. EU public procurement law already provides for exclusions from eligibility to bid for public contracts based on corporate misconduct and corruption and multi-lateral development banks operate a scheme of cross-debarment on a similar basis. Adverse determinations against businesses under the new EU Regulation should activate these or similar exclusions with the possibility, as under EU procurement law and debarment regimes, for ‘self-cleaning’ based on remediation for victims as well as improvements to business systems.
Conclusion
Ten years ago more than 1,110 garment workers lost their lives in the Rana Plaza disaster. Despite some advances, today millions of workers across the world and their families still suffer the immediate and long-terms consequences of serious breaches of minimum labour, health, safety, and environmental standards. Even in cases where activists and workers have won remediation for victims , the risk of reoccurrence and re-victimisation remains high. An unequivocal commitment in principle to securing remedies for forced labour victims, as EU actors claim, is therefore crucial. By integrating the measures outlined here into the draft Regulation, we suggest, the EU would help to put that principle into practice.
Rana Plaza, 10 years on: time for brands, unions and the industry to work together
I am very pleased to host two blog pieces which reflect on the 10 years which have passed since Rana Plaza as well as offering thoughts as to the way forward. The first is by Rubana Huq. Rubana is a Bangladeshi businesswoman, university academic and poet. She is the current Vice-chancellor of Asian University for Women. She is the chairperson of the Mohammadi Group and served as the first female president of the Bangladesh Garment Manufacturers and Exporters Association during 2019–2021. She offers a close up assessment of the sector and the well being of the people who work in it.
These blog pieces were commissioned and edited by Sandhya Drew and Felogene Anumo for the Blog of the Business and Human Rights Journal but an IT blip on the CUP website is delaying publication, and so I have seized this opportunity. These pieces will be crossposted by the BHRJ Blog too at a later date.
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On February 3, 2014, I wrote here about the hell which workers at Rana Plaza had gone through, and finished by asking ‘Where do we go from here?’
My pessimism in 2014 about Bangladesh’s readymade garment industry exports has proved unfounded. In only seven months, from July 2022 to January 2023, exports stood at $27.42 billion, registering a growth rate of 14.31% on a year-on-year basis. Way back in 2013-2014, right after the Rana Plaza collapse, export from Bangladesh was $24.49 billion, followed by 2014-15 number of $25.49 billion and it has continued to grow ever since. The last export figure of 2021-22 registered an export figure of $42.61 billion.
What led to this growth? The answer is pretty straightforward this time around. Bangladesh has remediated over the last ten years. The factory situation with regard to structural, fire and electrical integrity stand at an A++ level. Thanks to the international partners, namely Accord and Alliance, who had come in and intervened as early as May 2013 and began pushing factories to change their ways of business, things worked, things turned around. Today, the industry boasts about having 55 out of the best 100 green factories in the world.
But can Bangladesh RMG sector brag about labour conditions? This answer, this time around, is not necessarily easy to respond to. Minimum wage stands at $88 dollars per day including overtime. Prices of essentials such as onion, rice, wheat and sugar have sky rocketed. Meanwhile, demand for compliance has also shot up leaving a distinct disconnect with sourcing practices. Prices of garments have dipped.
Who will pay the extra? At a time like this, when the countries are waging wars, clothes are not cut to be priorities. Therefore, brands and retailers are as tight fisted as ever, yet trying to cover their own margins. But if the workers need to be paid more, manufacturers need to receive the extra bit, without which changing the wage scene will be a utopia.
Thus, the readymade garment sector of Bangladesh is sprinting to its destiny of cheap volume products instead of marathoning to the ultimate destination of a value added sustainable future. Ten years after the tragedy, the sector needs collaboration from all sides, brands and unions both. The time for finger pointing has to come to an end. Blame doesn’t steer towards progress; it just handicaps innovation.
Unless the brands, unions and the industry work hand in hand, the real success that evolves around the people who work there will be undermined and shortchanged.
Maybe twenty years down the line, while we stand sufficiently distanced from the horror of 24 April 2013, the sector may even turn a new page where the story of the workforce being shielded from want will be etched forever.
Rubana Huq is chairperson of the Mohammadi group. Between 2019-2021, she was the first woman president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) She is Vice-Chancellor of the Asian University for Women.
Human Rights and Sovereign Debt Restructurings: A Proposal for an Optimal Outcome
I am very pleased to host Danny Bradlow’s exposition of his Dove Principles. Danny has used his vast experience to design these principles. This blog piece was commissioned and edited by Sandhya Drew and Felogene Anumo for the Blog of the Business and Human Rights Journal but an IT blip on the CUP website is delaying publication, and so I have seized this opportunity. This piece will be crossposted by the BHRJ Blog too at a later date.
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Daniel Bradlow, University of Pretoria
Zambia defaulted on its debt in November 2021 but has not yet reached an agreement with its creditors. Its president recently warned that this situation is hurting its citizens and undermining its democracy because “you cannot eat democracy”.
Given their adverse economic, social, and political impacts, it should be expected that human rights considerations would play an important role in sovereign debt restructurings. Unfortunately, this is not the case, even though all negotiating parties have human rights responsibilities or obligations.
It is unclear why these actors pay so little attention to human rights in the sovereign debt restructuring context. One possibility is that they are not sure how to incorporate human rights into their transactions.
This should not be surprising. It is difficult to understand the causal linkages between a sovereign debt crisis and the deteriorating human rights situation that follows. There can be multiple such linkages and the lines of causation can run in different directions.
Consequently, a human rights consistent debt restructuring will be fact and context specific and will require the parties to understand their role in both creating the situation and in mitigating or eliminating the adverse human rights impacts.
This requires the parties to have a common approach to analysing the debt crisis and its anticipated economic, financial, human rights, environmental, social and governance impacts. Thus, they could benefit from having a mutually acceptable set of principles that incorporates all these issues.
In 2021, I received a grant from the Open Society Initiative for Southern Africa to explore the feasibility of my proposal to establish a DOVE (Debts of Vulnerable Economies) Fund. This fund would buy the debts of sovereigns in distress and state that it would only support sovereign debt restructurings that were consistent with widely accepted international norms and standards, My work on this project revealed shortcomings with all the existing international standards and led me to develop the DOVE Fund Principles. The principles are based on 20 existing international norms and standards developed by states, international organisations, industry associations and civil society organisations. They can provide a common framework for the negotiations between states and their creditors. They are now set out and explained.
The DOVE Fund Principles
Principle 1: Guiding Norms: Sovereign debt restructurings should be guided by the following 6 norms: Credibility, Responsibility, Good Faith, Optimality, Inclusiveness, and Effectiveness.
- Credibility: The Negotiating Parties and the Affected Parties are confident that the restructuring process can produce an Optimal Outcome. The “Negotiating Parties” are the sovereign debtor, its creditors and their advisors. The “Affected Parties” are the residents of the debtor country and those individuals whose savings either directly or indirectly finance the debt being restructured.
- Responsibility: The Negotiating Parties seek an agreement that respects their respective economic, financial, environmental, social, human rights and governance obligations and/or responsibilities.
- Good Faith: The Negotiating Parties intend to reach an agreement that takes account of all their rights, obligations and responsibilities.
- Optimality: The Negotiating Parties seek an “Optimal Outcome”, that addresses the circumstances in which the transaction is being negotiated, the parties’ respective rights, obligations and responsibilities, and offers them the best possible mix of economic, financial, environmental, social, human rights and governance costs and benefits.
- Inclusiveness: All creditors can participate in the restructuring process and the Affected Parties are able to make informed decisions about how it will impact them.
- Effectiveness: The Negotiating Parties should seek an Optimal Outcome in a timely and efficient manner.
Principle 2: Transparency: The Negotiating Parties and the Affected Parties should have access to the information that they need to make informed decisions regarding the debt restructuring.
The creditors have access to sufficient information that they can make informed decisions about the scope of the sovereign’s debt problems, the options for their resolution and their potential economic, financial, environmental, social, human rights and governance impacts. The Affected Parties should also have access to sufficient information, subject to appropriate safeguards, that they can make informed decisions about how the restructuring may affect their rights and interests.
The creditors should inform the debtor and the Affected Parties about their environmental, social, and human rights obligations and responsibilities.
Principle 3: Due Diligence: The sovereign debtor and its creditors should each undertake appropriate due diligence before concluding a sovereign debt restructuring process.
The Negotiating Parties should utilize a debt sustainability analysis which credibly determines the sovereign’s debt restructuring needs and their impacts.
Principle 4: Optimal Outcome Assessment: At the earliest feasible moment, the Negotiating Parties should publicly disclose why they expect their restructuring agreement to result in an Optimal Outcome.
An Optimal Outcome requires the Negotiating Parties to assess the expected impacts of their proposed agreement on the economic, financial, environmental, social, human rights and governance condition of the sovereign borrower and the Affected Parties.
Principle 5: Monitoring: The restructuring process should incorporate credible mechanisms for monitoring the implementation of the restructuring agreement.
The Negotiating Parties should audit the financial aspects of the agreement and monitor its economic, social, environmental, human rights and governance impacts. This information should be published periodically.
Principle 6: Inter-Creditor Comparability: The restructuring process should ensure that all creditors make a comparable contribution to the restructuring of the sovereign’s debt.
The process should give creditors the confidence that all other creditors are making comparable contributions to an Optimal Outcome.
Principle 7: Fair Burden Sharing: An Optimal Outcome should share the burden of the restructuring fairly between Negotiating Parties and should not impose undue costs on any of the Affected Parties.
Both the debtor and the creditor bear some responsibility for causing debt crises and should absorb some of the restructuring costs. Moreover, they should seek to limit how much of the restructuring costs the Affected Parties will have to bear, considering their relative wealth and ability to absorb losses.
Principle 8: Maintaining Market Access: The restructuring agreement, to the greatest extent possible, should be designed to facilitate future market access for the borrower.
It is an unfortunate reality that debtor countries must seek financing from international financial markets. Thus, the Optimal Outcome should help the debtor regain access to financial markets as quickly as possible.
As the Zambian case demonstrates, the current arrangements for restructuring sovereign debt are sub-optimal. The DOVE Fund Principles seek to overcome this problem by offering both Negotiating and Affected Parties a common conceptual framework that facilitates a fair resolution of the crisis incorporating all its social, environmental, human rights, economic, financial and governance impacts. They therefore can promote an Optimal Outcome.
For further information on this ongoing project, contact: danny.bradlow@up.ac.za
Business and Human Rights Journal articles for further reading:
1) Social Bonds for Sustainable Development: A Human Rights Perspective on Impact Investing
Stephen Kim PARK
Journal: Business and Human Rights Journal / Volume 3 / Issue 2 / July 2018
pp. 233-255
2) The Record of International Financial Institutions on Business and Human Rights
Jessica EVANS
Journal: Business and Human Rights Journal / Volume 1 / Issue 2 / July 2016
pp. 327-332
My name is Nadia Bernaz and I am Associate Professor of Law and Governance at Wageningen University in the Netherlands.
My main area of research is business and human rights. I look at how corporations and businesspeople can be held accountable for their human rights impact through international, domestic and transnational processes.