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The Rana Plaza Incident: The Right to Remedy

Bachelor Thesis

Corporate Social Responsibility

Author:

Isabelle Attallah

University College of Utrecht

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Table of Contents List of Abbreviations p. 3

Chapter I – Introduction p. 4 1.1. The Rana Plaza Incident p.4 1.2. Business & Human Rights p.5 1.3. Outline p.8 Chapter II – Factors for legal feasibility of civil liability claims p.9 2.1. Introduction p.9 2.2. Jurisdiction p.9

2.2.1. Jurisdiction in European Union Member States courts p.10 2.2.2. Jurisdiction in United States courts p.12

2.3. Applicable Law p.15 2.3.1. Applicable law in EU Member States courts p.15 2.3.2. Applicable law in the United States courts p.17 2.4. Substantive Legal Basis p.18 2.4.1. Legal basis in the United States p.19 2.4.2. Legal basis in the European Union p.20 2.5. Practical and procedural circumstances p.21 2.5.1. Introduction p.21 2.5.2. Complex nature of litigation p.22 2.5.3. The burden of proof p.22 2.5.4. The limitation period p.23 2.5.5. Financial legal costs p.23 2.5.6. Access to remedy p.23 2.5.7. Conclusion p.24 Chapter III – Case Law Analysis p.24 3.1. Introduction p.24 3.2. Doe v. Wal-Mart Stores Inc. p.25 3.3. Union Needletrades v. The Gap et al p.28 3.4. Lesson learned about the cases p.32 Chapter IV – Alternative legal Options p.33 4.1. The joint-employer doctrine p.33 4.2. Claims under “deceptive commercial claims” p.36 Chapter V – Conclusion p.38 Bibliography p.41

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List of Abbreviations ATCA Alien Tort Claims Act ATS Alien Tort Statute CCC Clean Clothes Campaign CNMI United States Commonwealth of the Northern Marianas Islands EU European Union FLSA Fair Labor Standards Act NGO Non-Governmental Organization SRSG Special Representative of the Secretary-General of the United Nations TVPA Torture Victims Protections Act UDHR Universal Declaration of Human Rights UNGP United Nations Guiding Principles on Business and Human Rights UN United Nations USA United States of America US United States USC United States Code

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The Rana Plaza Incident: The Right to Remedy

“We are guided by the principle that success in business is dependent on putting human issues at first.” – Phillips Van Heusen Corporation

Chapter 1 – Introduction

1.1. The Rana Plaza incident

One year ago, on April 24th 2013, the collapse of the Rana Plaza building led to

more than a thousand victims and approximately 2,500 injured workers in Savar in

Bangladesh.1 The collapse of the eight-story building owned by Sohel Rana was caused

by the poor construction of the building as well as the illegal presence of the garment

factories.2 The Rana Plaza incident was considered as one of the deadliest industrial

accidents in the last 30 years since the Bhopal incident in India.3

Precisely a year after the collapse of the Rana Plaza, victims are still waiting for

compensation. What is the reason behind this? The Bangladeshi government and non-

governmental organizations (NGOs) have been working towards a Donors Trust Fund to

compensate the victims of the Rana Plaza incident.4 This Trust Fund works on the

contribution of the brands whose labels were found in the ruins and other private donors.5

However, these brands have been rejecting their responsibility in this incident. The textile

industry being based on a complex chain of subcontractors allows each link of the chain

to evade its responsibility by blaming the following link.6 Therefore, the question that

this paper will seek to answer is: what is the feasibility of civil liability claims brought by

victims of corporate related abuses in host countries against retailers in their home

countries for obtaining compensation?

The underlying issue of these civil liability claims cases is the access to remedy

for workers who suffered from the unsafe and unfair labor practices in the supply chain.

On the one hand, the victims have the possibility to file claims against the directly

involved actors, meaning the building and factory owners, in their own country. Even if                                                                                                                1 Motlagh, J. (2014). Ayres, A. (April 24, 2014). 2 Idem, p.64. 3 Labowitz, S., & Baumann-Pauly, D. (April 2014). p.9. 4 Rana Plaza Arrangement website. 5 Idem. 6 NCP Report on Implementation of the OECD Guidelines in the textile and clothing sector. (2013). French National Contact Point for Implementation of the OECD Guidelines for Multinational Enterprises, p. 7.  

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the court would entitle them to compensation, these actors often do not have the financial

means to pay for the substantive damages claims.7 On the other hand, the victims can

bring a claim against the retailers in their home countries, which are considered the

indirectly involved actors. Often these indirect actors are the ones with the ‘big pockets’

and also considered responsible by the victims and therefore, they hope to have more

chance to get compensation for the harm they suffered. The laws in host states are often

corrupted or full of holes, which leaves the victims of corporate related abuses with no

other solution than access justice in home states of the retailers.8

The main focus of this thesis will be on the access to remedy in home countries

for victims of corporate related abuses in host countries and therefore the emphasis will

lay on tort law in Western society systems. Moreover, through the Rana Plaza incident,

the distribution of responsibilities between retailers and suppliers will be analyzed. Can

the retailers in the home countries be held accountable for harm caused in host countries

in the same way than parent companies can be held accountable for their subsidiaries

through civil litigation claims?

1.2. Business & Human Rights

In the wake of globalization over the past decades, companies have significantly

changed their ways of doing business, both on a national but even more on an

international level. Companies, always seeking for more profit, delocalized their

manufacturing activities to underdeveloped countries with lower labor costs but also with

clearly less strict labor rules and laws.

This context has led to the violation of human rights, by many companies causing

damage and harm to many individuals. These people are trying today to obtain redress for

the harm they suffered, in spite of complicated access to justice and inequities in the legal

standards between developing and developed countries. Several attempts have been made

under international law to establish a number of obligations for companies. However,

these attempts have been meager.

                                                                                                               7 Enneking, L.F.H. (2009), p.905-907. 8 Dam van, C. (2011), p.228-229.    

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In 2005, the Secretary General Kofi Annan appointed John Ruggie as his “Special

Representative of the Secretary General (SRSG) on the Issue of Human Rights and

Transnational Corporations and other Business Enterprises” to identify the standards of

corporation responsibility and accountability for businesses and human rights.9 During

his mandate, he first produced in 2008 a report with a three pillar framework: Protect,

Respect and Remedy: A framework for business and Human Rights.10 The next three

years of his mandate, John Ruggie worked on the United Nations Guiding Principles for

Business and Human Rights (UNGPs) endorsed in June 2011 by the United Nations (UN)

Human Rights Council.11 The UNGPs were created to address and prevent the risk of

impact of business activities on human rights. These Guiding Principles contain the three

pillars defined in the 2008 framework: (1) the state duty to protect human rights; (2) the

corporate responsibility to respect human rights and (3) access to remedy.12

The third pillar, access to remedy, is an important component of the two other

pillars.13 The right to remedy provides the means through which victims of corporate

related abuses demand a suitable response for the harm they have suffered, reparations

and sanctions.14 Remedy can be provided through judicial or non-judicial grievance

mechanisms. First of all, effective judicial mechanisms entail that victims are able to

bring their claim in front of domestic courts without having barriers such as lack of

resources, corruption of the legal system or the high costs of bringing the claim.15

Secondly, the non-judicial grievance mechanisms complete the judicial mechanisms and

can be mediation-based.16 Moreover, these non-judicial mechanisms are based on eight

criteria: legitimate, accessible, predictable, equitable, transparent, rights-compatible, a

source of continuous learning and based on engagement and dialogue.17 In other words,

non-judicial grievance mechanisms need to provide for effective access to remedy.

                                                                                                               9 How to do business with respect for human rights: a guidance tool for companies. Business & Human Rights Initiative: Global Compact Network Netherlands, p.20. 10 Idem, p.20. 11 Idem, p.20. 12 Ruggie, J. (2008), p. 191-194. 13 Eijsbouts, J. (2011),p. 3-4. 14 Injustice Incorporated: Corporate abuses and the human rights to remedy. (2014). Amnesty International, p. 29. 15 Ruggie, J. (2011), p. 28-30. 16 Idem, p. 30.    17 Ruggie, J. (2011), p. 33-34.

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However, the UN Guiding Principles remain weak when it comes to addressing

the issue of compensations in cases where the company is not responsible under domestic

law. Indeed, they suggest that in cases where no legal responsibility has been determined,

but where the corporation is nevertheless to some extent responsible for the harm that

occurred, it is left to the company to decide whether or not it will play a role in providing

for remediation.18 The UNGPs are only guidance for companies to respect human rights,

not an obligation to adopt or to respect them, even if they aim to provide an ‘authoritative

global standard’.19 New international legal obligations are not created by the UNGPs.20

Moreover, the implementation by companies of the UNGPs does not mean that they will

respect all international human rights, since the UNGPs do not incorporate human rights

law or other mandatory standards for companies with respect to human rights.21

In most developing countries, legal standards for health and safety measures are

very low. The rapid economic growth in some of these developing countries has created

the important challenge of having to enhance their legal, health and safety standards as

well as infrastructure development.22 The UNGPs, therefore, aimed to provide a global

standard to prevent and address the bigger injury risks in host countries due to their weak

labor laws and health and safety measures. In Bangladesh, after the Rana Plaza incident,

workers, employers and government concluded a tripartite agreement in January 2013

aiming to strengthen safety measures in textile factories.23

Furthermore, the difficulty in relationships with business partners in the supply

chain is to determine who is responsible for other people’s harm. The complexity and

structure of a supply chain make it extremely difficult to define the boundaries of the

business relationships and therefore, to determine the responsibilities of the retailers

when an accident occurs.24 Especially in the case where there are hidden subcontractors,

the retailer is not even aware of. Retailers claim that their relationship does not extend

                                                                                                               18 Michalowski, S. (2014), chapter 4. 19 UN Human Rights Council: Weak stance on business standards. Human Rights Watch. 20 Huijstee van, M., Ricco, V., & Ceresna-Chaturvedi, L. (2012), p. 12-13. 21 Idem, p.12-13. 22 Labowitz, S., & Baumann-Pauly, D. (April 2014), p. 16. 23 NCP Report on Implementation of the OECD Guidelines in the textile and clothing sector. (2013). French National Contact Point for Implementation of the OECD Guidelines for Multinational Enterprises,p.1-2. 24 Idem, p.19.  

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beyond the main subcontractor because they have no influence over the various hidden

subcontractors as they ignore who they are and as such no ‘direct link’ can be established

between the retailer and these hidden subcontractors.25 However, NGOs and retailers do

not seem to agree on the boundary of these business relationships. NGOs have a broader

interpretation of these business relationships as they consider it encompasses the entire

supply chain, contrary to the retailers who consider their relationship does not go beyond

the contractual relationship with the main supplier.26

1.3. Outline

This thesis will provide an overview of the feasibility of civil liability against

retailers for abuses committed abroad. National civil courts do have the potential to

provide appropriate remedies and redress for victims of corporate related abuses but

many times these national civil courts lack the jurisdiction or adequate procedural rules to

hear these cases. Victims’ difficulties to obtain access to justice and effective remedies in

their own country led them to search for remedies in the home courts of retailers.

In order to answer the question, this thesis will be divided into four parts. Chapter

two will discuss the different factors to determine the legal feasibility of civil liability

claims in home countries for abuses of human rights in host countries. The third chapter

will be a case analysis, in order to analyze the relationship between the retailers and their

suppliers and the distribution of responsibility between the two in the United States and

in the European Union, as well as the path that victims need to go through to access

remedy. Chapter four will look at the alternative legal options to bring claims against

retailers for the harm that occurred in their supply chain and finally, chapter five will

conclude on the findings of this study.

                                                                                                               25 NCP Report on Implementation of the OECD Guidelines in the textile and clothing sector. (2013). French National Contact Point for Implementation of the OECD Guidelines for Multinational Enterprises, p. 19 26 Idem, p. 21.    

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Chapter 2 – Factors for legal feasibility of civil liability claims against retailers

2.1. Introduction

In the current context of globalization, retailers are seeking to produce goods

more cheaply than in their more expensive and stricter domestic labor market, in order to

generate more profits in this way. However, by exploiting less strict labor standards in

developing countries, retailers maintain and sometimes even generate (by their pressing

demands) bad working conditions in the supply chain.27 The question here is: can

retailers be held accountable by the court for labor violations in their supply chain? A

second question is: can victims obtain redress for these corporate related abuses in the

retailers’ home countries?

In order to answer these two questions, the following factors for legal feasibility

of civil liability claims against retailers will be analyzed: (1) whether retailers’ home

courts have jurisdiction to hear the case, in other words, jurisdiction issues; (2) what law

should be applied to resolve the legal issue, the law of the host state or the law of the

home state; (3) the substantive legal basis and (4) other procedural and practical

circumstances.28 This analysis will be made for both the European legal system and the

United States legal system since the European Union Member States and the United

States are the major countries where headquarters of the retailers are situated.

2.2. Jurisdiction

First of all, the issue of jurisdiction is the first factor to be determined by the

court, especially in civil liability claims with international issues brought before domestic

court. The main question that the court will ask itself is: whether and to what extent the

court has jurisdiction on the matters brought to it?29

The issue of jurisdiction is an important matter in civil litigation claims against

retailers in home countries for violations committed in the host countries. The problem at

stake in these cases is that the claims are brought in a different country (home state) than

where the harm occurred (host state).30 It is, therefore, not given that the home states have

                                                                                                               27 Maryanov, D.C. (2010), p.402-403. 28 Meeran, R. (2011), p.10-11. 29 Enneking, L.F.H. (2011), p.133-134. International commission of jurists, expert legal panel. (2008), p.49. 30 Enneking, L.F.H. (2011), p. 133-134.    

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jurisdiction to hear these trans-boundary cases.31 Establishing jurisdiction is especially

difficult and complex when courts are asked to determine the responsibility of retailers

over the acts of their suppliers abroad. The domestic rules of private international law

determine whether these domestic courts have jurisdiction over these cases.

2.2.1. Jurisdiction in European Union Member States courts

In Europe, the Brussels I Regulation on jurisdiction and the recognition and

enforcement of judgments in civil and commercial matters (Brussels I Regulation)

applies within the European Union (EU) Member States and determine the exercise of

jurisdiction in cases of cross-border civil and commercial matters. The Brussels I

Regulation is binding and applicable on all EU Member States. The Brussels I Regulation

in its general provision establishes that ‘persons domiciled in a Member State shall,

whatever their nationality, be sued in the courts of that Member State’32 and ‘a company

or other legal person or association of natural or legal persons is domiciled at the place

where it has its (a) statutory seat, or (b) central administration, or (c) principal place of

business’.33 In other words, the Brussels I Regulation only provides jurisdiction for

companies that have their headquarters in one of the EU Member States.34 However, the

Brussels I Regulation also allows victims of trans-boundary cases to sue a European

company in another EU Member State than the one they are domiciled in.35 Moreover, in

situations where the cases fall outside the scope of the Brussels I Regulation, domestic

rules on international civil jurisdiction establishes the courts’ jurisdiction on these

cases.36 These rules might be broader than the Brussels I Regulation and therefore, some

EU Member States might be able to have jurisdiction over cases that they would not be

able to judge under the Brussels I Regulation.37 Furthermore, since 2005, EU Member

State courts cannot stop proceeding on the grounds of the forum non conveniens doctrine,

as in common law countries, in cases brought against EU domiciled defendants, where

                                                                                                               31 Enneking, L.F.H. (2011), p.133-134. 32 Article 2 (1) of Brussels I Regulation. 33 Article 60 (1) of Brussels I Regulation. 34 Skinner, G., McCorquodale, R., & De Schutter, O. (2013), p.5-6. 35 Enneking, L.F.H. (2011), p. 146. Article 5 Brussels I Regulation 36 Idem, p.147. Article 4(1) Brussels I Regulation 37 Enneking, L.F.H. (2009), p.916-917.  

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the alternative location is situated outside the EU.38 The forum non conveniens doctrine

allows courts to dismiss a case when the court considers that another court or forum is

better suited to hear the case.39 The plaintiff may however re-file the case in a more

appropriate court. Both the court and the defendant may invoke the forum non conveniens

doctrine.40 Moreover, a case will not be dismissed under this doctrine under two

conditions: first, if there is no other court to hear the case and secondly, if the alternative

forum’s judicial system is inadequate.41 Sometimes the adequacy of an alternative

forum’s remedy is also considered as a decisive factor in the granting or not of a

dismissal.42

- Outcome for the Rana Plaza victims

If the Rana Plaza victims would decide to bring a civil liability claim against the

European retailers in their home countries, would the court have jurisdiction over their

case? As abovementioned, EU Member States only have jurisdiction over companies that

have their headquarters in the EU, which is the case of the retailers involved in the Rana

Plaza incident. However, the victims are not domiciled in any EU Member State since

they are from Bangladesh and according to Article 2(1) of the Brussels I Regulation, the

person needs to be sued in the Member State where it is domiciled.43 Since the victims

are nationals of non-EU Member States, it is not certain that they will be subject to

European Union law and that the court will have jurisdiction over the subject matter of

the case.44 Nevertheless, domestic rules on international civil jurisdiction establish the

court jurisdiction on cases that fall outside the scope of the Brussels I Regulation;

therefore, the Rana Plaza victims might still have a chance to have a hearing of their case

depending on each individual EU Member State domestic rules on international civil

jurisdiction.

                                                                                                               38 Meeran, R. (2011), p.12-14. 39 Forum non conveniens definition. Legal information institute. Cornell University Law School. 40 Idem. 41 Idem. 42 Idem. 43 Article 2(1) Brussels I Regulation. 44 Shine, P. (2010), p.451-453.  

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2.2.2. Jurisdiction in United States courts

- US Common Tort Law

In the United States, the courts have jurisdiction over broader issues than in the

EU Member States courts under Brussels I Regulation. In the United States, the court has

to determine that the court has first, personal jurisdiction over each of the defendants that

are sought to be held liable and second, subject-matter jurisdiction over the claim itself,

for cases with trans-boundary issues.45 Regarding the first element, personal jurisdiction,

the court usually defines that the presence of the defendant within the United States is

enough for the court to exercise jurisdiction.46 The second element, subject-matter

jurisdiction, can be established once the plaintiffs have decided on what legal grounds

they will base their case. On the one hand, the province of the federal courts decides

cases brought on the basis of the Alien Tort Statute. On the other hand, state courts

decide cases brought on the basis of US common tort law.47 The diversity jurisdiction is a

form of subject-matter jurisdiction, under 28 U.S.C. § 1332(a)(2), which allows US

courts to hear cases where the parties are citizens of different states or non-US citizens,

these parties are ‘diverse in citizenship’. Therefore, if all parties of one side are US

citizens and all the parties of the other side are non-US citizens, the US court will have

diversity jurisdiction.48 Furthermore, the United States is a common law country, and

therefore, on the basis of the doctrine of forum non conveniens, the courts may reject a

claim if the case can be tried in a more adequate forum.49 However, if the alternative

forum does not allow for effective and satisfactory remedy, the court might decide to

allow the case.50 Therefore, if the host country courts offer unsatisfactory result, the US

state court will hear the case.51

                                                                                                               45 Enneking, L.F.H. (2011), p.140-141. 46 Joseph, S. (2005), p.83-84. 47 Enneking, L.F.H. (2011), p.140-142. 48 Maryanov, D.C. (2010), 413. 49 Idem, p. 142-143. 50 Idem, p. 142-143. 51 Idem, p.142-144.

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- Alien Tort Statute

The Alien Tort Statute (ATS) (also called the Alien Tort Claims Act) was created

as part of the Judiciary Act in 1789.52 The first case to use the ATS was in 1980, the

Filártiga case.53 This act allows US courts to have jurisdiction in cases of international

human rights violations and is part of the United States Code that states under 28 U.S.C.

§1350: ‘the district court shall have jurisdiction of any civil action by an alien for a tort

only, committed in violation of the law of nations or a treaty of the United States’.54

Victims (foreign citizens) of human rights violations outside the United States are able to

seek remedies under the Alien Tort Claims Act (ATCA).

In 2010, in the Kiobel v. Royal Dutch Petroleum Co case, the Second Circuit

Court of Appeals held that federal courts do not have subject-matter jurisdiction over

civil claims against corporations/companies on the issue of norms of customary

international law violations under the ATS.55 In 2011, the plaintiffs appealed the lower

court’s decision and brought the case to the Supreme Court. However, the Supreme Court

asked the plaintiffs to present additional briefs in order to hear the case again.56 In

October 2012, the Supreme Court heard the case again and gave its outcome on April 17,

2013.57 The Supreme Court decided that the Alien Tort Statute does not apply and does

not have jurisdiction over cases where the harm occurred outside of the United States.58

In other words, the ATS can only be used, according to this judgment, when non-US

citizens, aliens, bring a claim for a tort that occurred in the United States. As a

consequence, the case was dismissed by the Supreme Court.

The Kiobel case led to the conclusion that under ATS, corporate liability claims

are not supported by international law.59 Moreover, it also led to the uncertainty of using

domestic law beyond the limits of a country’s territory. Therefore, the Kiobel v. Royal

Dutch Petroleum Co case could have an impact on other trans-boundary claims brought

                                                                                                               52 Dam van, C. (2011), p.232-234. 53 Idem, p. 232-234. 54 28 United States Code § 1350. 55 Enneking, L.F.H. (2011), p.141-142. Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 120 (2d Cir. 2010). 56 Business and Human Rights Resource Center, see Shell lawsuit. (http://business-humanrights.org/en/shell-lawsuit-re-nigeria-kiobel-wiwa#c9306) 57 Idem. 58 Idem. 59 Berkowitz, P., Congiu, M., Kloosterman, J., Savage, E., & Matson, M. (April 2013).  

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under US law. In the situation of holding retailers accountable for the human rights

violations committed in their supply chain, this case could have an effect. Nevertheless,

for the moment the impact of the Kiobel case on claims between retailers and suppliers is

still unclear.60 As a result, this may lead to the extinction of company accountability

under the ATS.61 Moreover, this may indicate that victims of corporate related abuses

will have to bring their claim under US common tort law in US state courts or in their

host country courts.62

- Outcome for the Rana Plaza victims

Assuming that the Rana Plaza victims brought a claim against US retailers in their

home states, would US courts have jurisdiction over that case? As mentioned already, US

courts need to determine personal jurisdiction and subject-matter jurisdiction. First of all,

concerning personal jurisdiction, the victims are from Bangladesh, and the retailers’

headquarters are in the United States. Therefore, under 28 U.S.C. §1332(a)(2), foreign

plaintiffs have diversity jurisdiction, if on the one side there are US citizens and on the

other side there are non-US citizens, whether plaintiffs or defendants.63 As a result, the

court would have personal jurisdiction over this case. Secondly, subject-matter

jurisdiction will depend on what legal grounds the case is brought under: the ATS or on

the basis of US tort law. If the Rana Plaza victims bring their case under the ATS, the

court might not have jurisdiction due to the Kiobel v. Royal Dutch Petroleum Co case:

‘we must conclude, therefore, that insofar as plaintiffs bring claims under the ATS

against corporations, plaintiffs fail to allege violations of the law of nations, and

plaintiffs’ claims fall outside the limited jurisdiction provided by the ATS’.64 However,

since it is still unclear whether the ATS has an impact on the cases brought by victims of

human rights violations against retailers in their home states, the Rana Plaza victims

might still be able to bring their claim under the ATS. On the other hand, if the Kiobel

case would have an impact on these types of cases, regarding retailers and their supply

chains, the Rana Plaza victims will not be able to bring their case under the ATS, since                                                                                                                60 Berkowitz, P., Congiu, M., Kloosterman, J., Savage, E., & Matson, M. (April 2013). 61 Enneking, L.F.H. (2011), p. 123-124. 62 Idem, p.144-145. 63 Meeran, R. (2011), p.413. 28 United States Code §1332(a)(2). 64 Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 120 (2d Cir. 2010). §120.

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the harm was caused in Bangladesh and not in the United States as the ATS requires

under the Kiobel case.

Moreover, under US common tort law, the Rana Plaza victims could bring their

claim to the US state court since it allows cases under diversity jurisdiction. The court

could decide to dismiss the case under the forum non conveniens doctrine and consider

the Bangladeshi court as a more adequate forum to bring the case. However, in cases

where the US state court considers that the host country courts provide for unsatisfactory

outcome and remedies, it has jurisdiction to hear these cases. Therefore, it might be

complicated for the Rana Plaza victims to access remedy in the home courts of the

retailers.

2.3. Applicable law

Once the court has established that it has jurisdiction to hear the case, the

following question to answer is: on the basis of what law should the legal matters be

resolved? In other words, the court will look at what law applies to the issue since two

countries are usually involved in these trans-boundary cases. Therefore, the law of these

two countries could be applied to resolve the case. In order to determine the applicable

law, the court will choose on the basis of the domestic rules of private international law

that apply in the home country.65 These domestic rules of private international law will

establish which system of law of the different countries involved in the dispute will rule

the case. Depending on the system of law that the court will use, the outcome of the case

may differ. Moreover, the statute of limitation is different in each country and therefore,

choosing the law of one country rather than the one of another country also has an

influence on how long after the facts you can still bring the case in front of the court.

2.3.1. Applicable law in EU Member States courts

In Europe, the choice of law is determined by the Rome II Regulation on the law

applicable to non-contractual obligations (Rome II Regulation). Article 15 of the Rome II

Regulation provides the scope of the applicable law, as follows:

                                                                                                               65 Enneking, L.F.H. (2011), p.134-135.

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‘(a) The basis and extent of liability, including the determination of persons who

may be held liable for acts performed by them; (b) the grounds for exemption

from liability, any limitation of liability and any division of liability; (c) the

existence, the nature and the assessment of damage or the remedy claimed; (d)

within the limits of powers conferred on the court by its procedural law, the

measures which a court may take to prevent or terminate injury or damage or to

ensure the provision of compensation; (e) the question whether a right to claim

damages or a remedy may be transferred, including by inheritance; (f) persons

entitled to compensation for damage sustained personally; (g) liability for the

acts of another person; (h) the manner in which an obligation may be

extinguished and rules of prescription and limitation, including rules relating to

the commencement, interruption and suspension of a period of prescription or

limitation’.66

This article does not make the interface between the applicable law (substance) and the

law of the forum (procedure) any easier, as it makes no reference to substance and

procedure.67

It is therefore up to the court to decide, based on the Rome II Regulation, whether

the law of the home country where the case is heard will be applied or whether the law of

the host country where the harm occurred will be applied. In Europe, since 2009, the

Rome II Regulation has unified the rules on the choice of law that apply to trans-

boundary tort cases in EU Member States courts.68 Therefore, according to Article 4(1) of

the Rome II Regulation, all EU Member States courts have to apply the law of the

country where the harm has occurred in cases of trans-boundary issues.69 As a result, the

tort law of the host country will be the applicable law. Nevertheless, there are some

exceptions to the Rome II Regulation, in cases of environmental damage; there is a

                                                                                                               66 Article 15 Rome II Regulation. 67 Ahem, J., & Binchy, W. (2009), p.43-44. 68 Dam van, C. (2011), p. 231-232. Enneking phd, p.160-161. 69 Article 4(1) Rome II Regulation: ‘unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur’.

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possibility of using the law of a different country, otherwise, the tort law of the host

country is used for all other cases.70

- Outcome for the Rana Plaza victims

Assuming that the Rana Plaza victims brought a claim against European retailers

in their home states. The applicable law would be Bangladeshi tort law according to

Article 4(1) of the Rome II Regulation, since the harm occurred in Bangladesh with the

collapse of the Rana Plaza building. Moreover, the Rana Plaza case not being about

environmental damage, there is no possibility to use the law of the EU Member State

where they are bringing their claim. The victims therefore will have access to remedy and

compensation to the extent mentioned under Bangladeshi tort law.

2.3.2. Applicable law in US courts

In the United States, as in Europe, the law applied to trans-boundary cases, where

more than one country is involved, was the law where the tort occurred under the lex loci

delicti rule (Latin for the law of the place where the delict was committed). However, in

the 1950s, a number of transformations in the law led to the change of the establishment

of the applicable law.71 These transformations in the law did not give rise to a uniform

and single system.72 Each US State with its own legal system had a different approach to

establish the applicable law in cases of conflict of law. The courts became more flexible

on the issue of conflict of law meaning that instead of choosing the law of the country

where the tort occurred, the court might decide to choose its own law if it is in the best

interest of the parties, especially for the plaintiffs.73 US courts can choose between three

sources of law: international law, host state law (where the harm occurred) or home state

law (where the claim is brought).74 However, most of the time, the law of the state where

the harm occurred is applied, except if the law of that state goes against public policy of

                                                                                                               70 Dam van, C. (2011), p.231-232. Article 7 Rome II Regulation.  71 Symeonides, S.C. (2009), p. 345-347. Enneking, L.F.H. (2011), p.157-158. 72 Symeonides, S.C. (2009), p.346-347. 73 Enneking, L.F.H. (2011), p. 157-159. 74 Maryanov, D.C. (2010),p. 413-414.

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the state where the trial is proceeding.75 Therefore, US courts have the possibility to

apply the law they consider in the best interest of the parties.

- Outcome for the Rana Plaza victims

What if the Rana Plaza victims brought a claim against US retailers in their home

states, what would the applicable law be? In most cases, the law of the state where the

harm occurred should be the law applied to the case, meaning Bangladeshi law in the

case of the Rana Plaza incident. However, US courts have ‘diverse and inconsistent’ rules

to choose the applicable law.76 In the Doe I v. Unocal Corp. case, the court rejected to

apply Burmese law because it was in conflict with US public policy and because

Burmese law is vague.77 Therefore, US law was applied on the case. In the Rana Plaza

case, logically Bangladesh tort law should be applied. However, there is very little to no

reference to tort law in Bangladeshi law, as it has not yet been introduced in

Bangladesh.78 As a result, US courts might consider it too insufficient to apply it to the

case and therefore choose US tort law instead.

2.4. Substantive Legal basis

The third factor to establish the feasibility of civil liability claims is the

substantive legal basis upon which the case can be brought. Retailers have been

confronted with claims of bad working conditions or child labor in their supply chain. As

a result, civil liability claims have been filed against them. These civil claims are based

on the basis of tort law, especially ‘negligence’ under common law countries such as the

United States and the United Kingdom or ‘delict’ under civil law countries such as some

Member States of the European Union, with as a principal purpose to provide the victims

with compensation for the harm they suffered.79 Furthermore, in order to determine

whether the retailers can be held accountable/liable for these human rights violations a

number of elements need to be analyzed.

                                                                                                               75 Enneking, L.F.H. (2011), p.159-160. 76 Farrell, N. (2013), p.1517. 77 Doe I v. Unocal Corp., 395 F.3d 932 (9th Cir. 2002). Enneking, L.F.H. (2011), p.159-160. 78 Tariq Iqbal, A.S.M. (2014), p.168-169. 79 Meeran, R. (2011), p.3.    

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2.4.1. Legal basis in the United States

First of all, in the United States under the common law tort claims, victims can

bring a claim under negligence if the following four elements are proven: (1) duty of

care; (2) breach of duty; (3) causation; and (4) injury.80

The first element to be proven by the court is the duty of care of the retailer

towards the employees of its suppliers. The presence of codes of conduct can be one way

to establish that there is a duty of care between the retailers and the suppliers’ employees,

depending on the provisions present in this code of conduct.81 Moreover, if the retailers

have any control over the actions of its suppliers, a duty of care can be established.82 The

last way to determine such a duty is if the retailer makes any public declarations on an

implied duty towards the employees of its suppliers.83

Once the court has established the duty of care, the second element has to be

proven, the breach of duty. If the retailers had a duty of care towards the employees of its

suppliers but failed to protect them or did not provide them with good working

conditions, then the court can determine that a breach of duty has occurred. If the retailers

are aware of the risk of bad working conditions and the use of child labor in their supply

chain, the question remains whether they took the necessary precautionary measures.84

Retailers or even companies in general are often the ones with the best position to reduce

abuses in the supply chain.85 Therefore if they fail to do so, a breach of duty has occurred

and the retailers failed to live up to their standards.

The third element is causation, which means that the court will look at whether

there is a link between the harm that occurred in the supply chain and the actions or

demand of the retailers.86 In other words, the retailers, with their purchasing create the

conditions (pressing demands, unrealistic deadlines) in the supply chain and therefore

indirectly lead the supplier to harm the workers.87 Moreover, as aforementioned, if the

retailer is the only company purchasing from the supplier, then the retailer agreed on the

                                                                                                               80 Maryanov, D.C. (2010), p.429-431. 81 Idem, p.429-431. 82 Idem, p.429-431. 83 Idem, p.429-431.  84 Maryanov, D.C. (2010), p.429-431. Farrell, N. (2013). 85 Farrell, N. (2013), p.1505-1506. 86 Idem, p.1504-1506. 87 Idem, p. 1505-1506.

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price, deadline and the conditions and has a responsibility in the working conditions in its

supply chain. However, if the supplier has more than one company purchasing goods, it

is more difficult to show causation.88

The fourth element to be proven by the court is whether injury occurred. If the

court can establish that the victims have been injured due to the failure of the retailers to

provide for good working conditions, the claim has been made.

If the court can prove these four elements then the retailers are liable for the bad

working conditions in their supply chain and their suppliers’ employees can bring a claim

against the retailers to ask for compensation for the harm they suffered.

2.4.2. Legal basis in European civil law countries

Secondly, in European civil law system, victims can bring their claim under

delict. However, tort law in the European Union is not harmonized, as a result,

substantive and procedure regulations vary in each EU Member State.89 If victims want to

bring a claim against European retailers under tort law, the elements to prove will vary

from one EU Member State to another. In France, for example, three elements need to be

proven by the court: (1) fault; (2) damage; and (3) causation.90

The first element to be established by the court is whether there was fault. The

court would have to prove that the defendant committed an unlawful act and therefore,

breached its duty of care towards the plaintiffs. In order to define an unlawful act and a

failure to behave, the reasonable man is taken as example, “bon père de famille” in

French.91 This would mean in the retailer supplier relationship that the retailer failed to

behave in a reasonable manner and therefore caused harm to the plaintiffs, in this case its

suppliers’ employees.

The second element to be proven by the court is damage. The notion of damage is

not often discussed in court since the two other criteria are the ones the court considers as

most important.92 However, the damage needs to be certain, directly linked to the plaintiff

                                                                                                               88 International commission of jurists, expert legal panel. (2008), p.33-35.  89 Marcos, F., & Sánchez Graells, A. (2008), p.2-3. 90 Article 1382 Code Civil 91 Introduction to French tort law, p.2-3. 92 Idem, p.2-3.

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and of course, it needs to exist. If these three criteria are reunited, the element of damage

is proven.

The court finally has to establish the third element, causation. There needs to be a

direct link between the fault and the damage in order to have liability; therefore causation

needs to arise between the two other elements.93 In a more concrete way, this means that

there needs to be a causal link between the failure of the retailer to behave in a reasonable

manner and the damage caused due to this failure. In other words, the question that the

court will ask itself is whether the behavior of the retailer caused the harm that the

victims are suffering from. If the answer to this question is positive, the court establishes

that there is a causal link between the fault and the damage. On the other hand, if the

answer is negative, the retailers are not responsible for the harm that occurred and

therefore, the victims cannot get compensation from the retailers.

These three elements constitute the legal basis on which the court will decide

whether the French retailers are responsible for, or have an obligation to protect the

employees of their suppliers under civil tort law. In other words, the court will decide

whether the retailers are responsible for delict towards the employees of their supply

chain. If the retailers are considered responsible, the victims will be entitled to

compensation and effective remedy.

2.5. Procedural and practical circumstances

2.5.1. Introduction

The last factors to determine the feasibility of civil liability claims are the

procedural and practical circumstances. This factor enumerates the different

circumstances that have an impact on bringing a claim before the home country courts

such as financial issues, the complexity of bringing such trans-boundary claims,

collecting evidence, burden of proof, finding legal expert, access to remedy and time

limitation. 94 Therefore, the question to answer is: which practical and procedural

circumstances are important in determining the feasibility of trans-boundary civil liability

claims against retailers in their home state courts?

                                                                                                               93 Introduction to French tort law, p.2-3.  94 Meeran, R. (2011), p.16-18, 21-23.

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2.5.2. Complex nature of the litigation

The first factor that might compromise the feasibility of civil liability claims is

their complexity, since in trans-boundary cases at least two or more countries are

involved. The retailers are present in developed Western countries such as the European

countries or in the United States whereas the suppliers are present in the developing

countries such as Bangladesh, India or China. When victims of human rights violations in

the supply chain bring a case against the retailers in Western societies, a number of issues

arise such as jurisdiction of the court, applicable law and the distribution of responsibility

between the two actors (retailers and suppliers). In Europe, the European Union

harmonized civil procedures for all the EU Member States with the Brussels I Regulation

and the Rome II Regulation making it therefore easier and less complex to bring such

cases.95 Nevertheless, these trans-boundary cases are often falling outside the scope of

these regulations and consequently are being handled through the domestic rules of each

EU Member State.96 Due to the different rules in the EU Member States and such a trans-

boundary claim might work in one EU Member States but be dismissed in another EU

Member State. In the United States, on the other hand, these trans-boundary cases are

more promising. As aforementioned, US courts are more flexible regarding jurisdiction

and choice of law. The ATS also allows non-US citizens to bring a claim under tort law

in US courts. The US civil system is therefore, today, the most favorable forum to seek

for remedies for trans-boundary cases.97

2.5.3. The burden of proof

A second factor determining the feasibility of civil liability claims is the burden of

proof. The burden of proof consists of defining who has to prove what in order to have an

outcome and judgment of the case.98 In the situation of trans-boundary cases, companies

have usually more information and more financial means and are more influential than

the plaintiffs who are coming from developing countries. It is for these reasons that they

have an advantage on the plaintiffs. In civil proceedings, both the defendant and the

                                                                                                               95 Enneking, L.F.H. (2009), p.932-933. 96 Idem,p.932-933.  97 Meeran, R. (2011), p.2-3. 98 Enneking, L.F.H. (2011), p.189-190.

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plaintiff have to prove the facts of the case. If one of the parties does not prove the facts,

the court will consider that the facts did not happen.99

2.5.4. The limitation period

The third factor to determine the feasibility of civil liability claims is the

limitation period. It consists of the time period, which an individual has, to bring a claim

after harm occurred. In trans-boundary civil liability claims, the limitation period might

be problematic since two or more countries are involved. Depending on the applicable

law, the limitation period might be different and therefore decide on whether or not the

case can still be heard. The limitation period is a very significant element, especially

when the court chooses the applicable law. For example, under English law, for example,

the limitation period to bring a tort claim is three years whereas in France, it is five

years.100 Under the ATS, there is no limitation period; as a consequence, most courts

apply a ten years limitation period based on the Torture Victims Protections Act

(TVPA).101

2.5.5. Financial legal costs

The fourth factor is the financial cost of bringing such claims. The victims are

bringing their claim to the home states of the retailers. These cases are often lengthy and

with no certain outcome due to the complexity of the cases. Therefore, it is expensive to

fund these cases. Moreover, there is a lack of experienced lawyers in this field of law,

which makes it more expensive to hire qualified lawyers for these types of cases.

Furthermore, the complexity and the financial risks of these cases often lead to only very

few lawyers willing to take on these cases.102

2.5.6. The access to remedy

The access to remedy is the fifth factor to determine the feasibility of civil

liability claims. The role of tort law is to provide the victims with compensation, meaning

                                                                                                               99 Enneking, L.F.H. (2011), p.189-190. 100 Meeran, R. (2011), p.16. 101 Skinner, G., McCorquodale, R., & De Schutter, O. (2013), p.40.  102 Meeran, R. (2011), p.17-18

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effective access to remedy. However, with the complexity of these trans-boundary cases,

the court might not be in position to enforce certain remedies due to the fact that the court

is dealing with events that happened outside their country and as a result, outside their

jurisdiction.103 In Europe, the type of remedies should be determined under the law of the

state where the harm happened (host state) according to the Rome II Regulation. The

courts as a result, do not always provide the victims with the right remedies.104 In the

United States, even though it might be difficult to access remedy for harms that occurred

outside the US, the courts provide victims with monetary compensatory damages.105

2.5.7. Conclusion

All the above mentioned factors demonstrate that bringing civil liability claims in

the retailers’ home state for harm that occurred in the host state is extremely difficult due

to the number of barriers: the lack or inappropriate remedies, complexity of the case,

exorbitant financial cost and the lack of other forums to bring their case. The combined

barriers make it almost unfeasible for victims to bring their trans-boundary civil liability

claims in the retailers’ home state both in the United States and in Europe.

Chapter 3 – Case law analysis

3.1. Introduction

Victims of human rights violations in the supply chain have been bringing their

claims in home states of the retailers. A number of barriers and obstacles have made it

difficult for these victims to obtain effective remedy and compensation. The retailer

supplier relationship is different from the parent company subsidiary relationship. There

is an indirect relationship between the retailer and its supplier, which makes it difficult to

determine whether or not they can be held accountable for the harm suffered by the

supplier’s employees in the host state. It is often difficult for the court to determine

whether the retailer has a responsibility towards the supplier’s employees.106 As a

consequence, only a few cases were brought to the court, especially in Europe where

                                                                                                               103 Skinner, G., McCorquodale, R., & De Schutter, O. (2013), p.64. 104 Idem, p.64-65. 105 Idem, p.64-65.  106 Farrell, N. (2013), p.1519.

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these trans-boundary cases are still very difficult. The generally more “litigation-

friendly” US judicial system make that plaintiffs bring suit more easily in the United

States.107

Two cases will be analyzed in this chapter in order to understand whether it is

feasible for victims of corporate related abuses in the supply chain to bring a civil

liability claim against the retailer. These two cases, therefore involve retailers with their

supplier. They have been pursued on the basis of tort law or the Alien Tort Claims Act in

the United States. These cases were chosen because they will show the barriers and

obstacles that the victims have to go through to access remedy when they decide to bring

their claim against the retailers in their home state. The two cases take place in the United

States, since it is easier in the United States to bring trans-boundary cases.

This chapter will not analyze any cases taking place in Europe due to the non-

existence of such cases nowadays. In Europe, it is a lot more difficult to judge these

trans-boundary issues due to the lack of legislations and laws for these cases, as

mentioned in the previous chapter. The relationship between retailers and suppliers is

complex which makes it difficult for courts to determine the distribution of responsibility

between retailers and their suppliers. There has been no tort law cases brought before

European court against European retailers by victims of human rights violations in the

supplier. Some cases where brought in Europe regarding parent company and subsidiaries

but in these cases the distribution of responsibility is easier to establish. Consequently,

this chapter will only analyze cases brought before US courts, as followed: the first case

against Wal-Mart will show how difficult it is to determine the distribution of

responsibility between the retailer and its supplier. The second case against retailers who

have factories in Saipan Island will show an effective access to remedy case.  3.2. Doe v. Wal-Mart Stores Inc.

- Facts of the case

On July 10, 2009, employees of foreign companies that sell goods to Wal-Mart

brought a claim against Wal-Mart due to their working conditions in their factories. The

                                                                                                               107 Farrell, N. (2013), p. 1519.  

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employees of foreign companies that sell goods to Wal-Mart brought their claim on the

basis of the codes of conduct.

In 1992, Wal-Mart created a code of conduct for its suppliers, called “Standard

for Suppliers”, stating that its suppliers need to respect local laws regarding working

conditions, labor hours, discrimination, child labor and pay check.108 Moreover, in order

to ensure of the implementation of these Standard for Suppliers, Wal-Mart added a

paragraph regarding their right to inspect the suppliers. Nevertheless, the plaintiffs

claimed that Wal-Mart knew that the Standard for Suppliers was often violated by its

suppliers but did not take any measures against this.109 Moreover, they claimed that Wal-

Mart did not monitor its suppliers as mentioned in the Standard for Suppliers. The

plaintiffs were taught what to say when their factory was inspected, in order to have

positive reports.110 The Standard for Suppliers was even difficult to respect due to the

short deadlines and low prices.111 As a result of all these elements, the plaintiffs as third

party beneficiary, decided to bring a claim against Wal-Mart for the breach of contract

and failing to inspect the suppliers’ compliance with the Standard for Suppliers. The

plaintiffs first brought a class action in 2005 in California Superior Court but Wal-Mart

removed it to federal court due to diversity of citizenship, meaning that the plaintiffs are

non-US citizens.112 Therefore, the plaintiffs then brought their claim in federal court.

- Legal theories

Four legal theories where presented to the court in order to determine that the

Standard for Suppliers provide obligations that the plaintiffs can enforce against Wal-

Mart: (1) the plaintiffs are considered third party of the Standard for Suppliers; (2) there

is a joint employer relationship between Mal-Wart and its supplier’s employees; (3)

negligence claim: the duty to monitor its supplier was breached by Wal-Mart and

therefore, its duty to protect the supplier’s employees from bad working conditions was

also breached; (4) Wal-Mart made profit and more money because the Standard of

                                                                                                               108 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § I. 109 Idem, § I. 110 Idem, §I. 111 Idem, § I.  112 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § I.

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Suppliers was not respected in its supply chain.113 These four legal theories were

addressed under California law.

The court first addressed the first legal theory being the plaintiffs’ third party

beneficiary of the Standard for Suppliers. The plaintiffs stated that under the Standard for

Suppliers that Wal-Mart promised that it would make sure that the suppliers respect the

Standard for Suppliers. However, the court considered that the language used in the

Standard for Suppliers did not create a duty to monitor the suppliers but only a right to

monitor on the part of Wal-Mart.114 As a result the plaintiffs did not have the right of

action against Wal-Mart.

The second legal theory addressed by the court regards the joint employer

relationship between Wal-Mart and the plaintiffs. The court concluded that there is no

joint employer relationship between Wal-Mart and the plaintiffs. The reasoning behind

this conclusion was that the plaintiffs declared that Wal-Mart controlled day-to-day

employment. However, in reality Wal-Mart only controlled pricing, deadlines and quality

of the products, not considered as a day-to-day control by the court.115 As a result, the

court rejected the second legal theory on the joint employer relationship between Wal-

Mart and the plaintiffs.

The court proceeded to the third legal theory concerning negligence claims

brought by the plaintiffs. As stated already by the court, Wal-Mart does not owe a duty to

the Plaintiffs and Wal-Mart has no joint employer relationship with the plaintiffs.

Consequently, Wal-Mart does not have to protect its suppliers’ employees.116 The court

concluded that Wal-Mart did not owe a duty to the plaintiffs and as a result, this third

legal theory was also rejected.

The last legal theory regards the unjust enrichment of Wal-Mart thanks to the

plaintiffs’ non-respect of the Standard for Suppliers. Since the court rejected any

relationship between the plaintiffs and Wal-Mart, this fourth legal theory was also

rejected.117 The plaintiffs could bring a claim against their direct employer, meaning the

                                                                                                               113 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § III. 114 Idem, § III.A.1. 115 Idem, § III.B.6.  116 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), §III.C.9-10. 117 Idem, § III.D.12-13.

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factory owner for all these legal theories, however, bringing a claim against Wal-Mart is

impossible due to the indirect relationship there is between the plaintiffs and Wal-Mart.

- Outcome of the case

The court concluded that Wal-Mart had no legal obligation and duty under the

Standard for Suppliers to monitor or protect its suppliers’ employees. The relationship

between Mal-Wart and the plaintiffs is too weak for compensation; as a result, the claim

brought by the plaintiffs against Wal-Mart did not succeed.118

- Conclusion

The Doe I v. Wal-Mart Stores Inc. case shows the distribution of responsibility

between retailers in this case Wal-Mart and suppliers. In order for victims to access

remedy and get compensation, it needs to be proven that the retailer has a duty towards

the employees of its suppliers. The joint employer doctrine needs to be proved by the

court, in order to hold the retailers liable for the bad working conditions or the human

rights violations in its supply chain. In the Wal-Mart case, the plaintiffs did not manage

to prove that there was a joint employer relationship and therefore, did not get

compensation for the harm they suffered. This case is an example of the complexity of

these trans-boundary cases between retailers and suppliers.

3.3. Union Needletrades v. The Gap Inc. et al

- Facts of the case

In 1999, three separate lawsuits were filed in the United States against Saipan

garment factories and American retail apparel companies such as Gap, Wal-Mart,

Tommy Hilfiger and J.C. Penney.119 The island of Saipan is situated in the United States

Commonwealth of the Northern Marianas Islands (CNMI). Many clothing manufacturers

opened garment factories there because the label “Made in the USA” could be used.120

                                                                                                               118 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § IV.  119 Business and Human Rights Resource Center. (http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/USapparelcoslawsuitreSaipan) 120 Idem.

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This allowed the companies to export to the United States exempt from tariff and

quotas.121 Nevertheless, the CNMI has its own immigration and labor laws.122

The case was brought by an international labor union (Union of Needletrades

Industrial and Textile Employees) and three human rights organizations (Global

Exchange, Sweatshop Watch and Asian Law Caucus) in order to expose the “how” and

“why” of the situation in the Saipan garment factories.123 The first issue brought to the

court was the false labeling. The products made in the CNMI were labeled “Made in the

U.S.A.”, for competitive advantages.124 By doing so, the companies make more profit and

avoid tariff and quotas.125 However, the factories have almost no American workers, they

are run by more than half foreign corporations and the workers are mostly coming from

China, Bangladesh and the Philippines.126 Therefore, the labels on the products are false.

The second issue present in the CNMI garment factories is the working conditions and

living conditions of the workers. The workers are underpaid, have limited to no access to

water, are served infected food and have to work up to ten or twelve hours.127 The

recruiters painted a nice picture of the American dream with well-paid jobs, safe and

clean factories and comfortable living conditions in order to recruit as much workers as

possible but once the workers were recruited the reality was not as attractive.128

Moreover, in order to be employed, the workers need to pay a fee between $2,000 and

$7,000 to the recruiting agency.129 Once they are employed, the workers cannot ask for

salary increases or participate in political or religious activities and search for another

employment.130 The conditions present in the CNMI garment factories violate working

                                                                                                               121 Business and Human Rights Resource Center. (http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/USapparelcoslawsuitreSaipan). 122 Idem. 123 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999). (§1) 124 Idem (§2). 125 Idem (§2). 126 Idem (§3). 127 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999). (§3). 128 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999). (§43) 129 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999). 130 Idem.

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conditions such as working hours, health and safety conditions in the factory. 131 The

factories’ employees have their human rights violated.

- Jurisdiction

The Superior Court of the State of California County of San Francisco has to

determine whether it has jurisdiction over this case. In order to have jurisdiction, some

parties of the case need to be US citizens or US corporations. The defendants are either

US corporations with their headquarters in the United States or a non-US corporation

authorized to do business in the United States.132 The plaintiffs are the international labor

union and the human rights organizations, which are all based in the United States. As a

result, the court has jurisdiction over the case according to the California Constitution,

Article VI, §10.133

The CNMI contractors violated the Trade Act of 1930 (19 U.S.C. §1307), which

prohibits selling products in the USA that were manufactured by indentured labor.134

Moreover, the defendants are guilty of misleading claims since they state that they do not

use sweatshop conditions and help to eradicate them. If they were aware of the sweatshop

conditions in their suppliers in the CNMI, the defendants did not respect their statement

and lied to their customers.135

- Cause of actions

There were four causes of actions brought to the court. The first concerned the

enrichment of the retailers (defendants) on the workers’ expenses. The workers

underpayment and long hours allowed the defendants to make more profit either on a

deliberate way or in a negligent way.136 The second cause of actions regards the

                                                                                                               131 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999), (§3). 132 Idem (§9). 133 Idem (§8). 134 Idem (§76). 135 Idem, V. A. § 79.  136 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999), §V.A. 92

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defendants wrongful conduct. The defendants have acted contrary to public policy by

engaging in bad working conditions, acts of peonage and indentured servitude.137

The third cause of actions concerns the misleading labeling and advertising. The

defendants stated in advertisements that they do not work with suppliers that violate the

law or operate sweatshop conditions138.139 However, bad working conditions and human

rights violations were witnessed in the supply chain in the CNMI. The last cause of

actions is about the misleading claims of the defendants. The defendants stated that their

suppliers do not operate sweatshop conditions, which is misleading advertising.140 Since

the defendants knew that bad working conditions and sweatshops conditions were going

on in their supply chain.

- Outcome of the case

In 2004, after three long years of legal struggle, it was decided to close the case

with a $20 million settlement.141 Twenty-six companies and twenty-three Saipan garment

factories were involved in that decision. 142 Moreover, a code of conduct was

implemented in the agreement of the parties as well as independent monitoring and

monetary compensation.143 These decisions were made as part of the settlement.144

Nevertheless, one company did not accept the settlement. Levi Strauss argued that all the

clothing made in the CNMI garment factories complied with Levi Strauss’ code of

conduct.145

                                                                                                               137 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999), §V.B.103. 138 The US Department of Labor defined a sweatshop as a factory that violated two or more labor laws. 139 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23 Sept. 1999), §V.C.109-110. 140 Idem, §V.D.113-114. 141 Business and Human Rights Resource Center. (http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/USapparelcoslawsuitreSaipan) 142 Idem. 143 Idem. 144 Idem. 145 Business and Human Rights Resource Center. (http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/USapparelcoslawsuitreSaipan).  

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- Conclusion

This case is an example where the victims obtain remedy and compensation

through out of court settlement. As Nikki Bas, co-director of Sweatshop Watch stated, the

outcome of this case is an important victory because it shows how retailers can be

compelled by workers to be responsible for the working conditions in their supply

chains.146 However, due to out of court settlement this case did not create any legal

constraint and cannot be used as precedents for future similar cases.

3.4. Lesson learnt about the cases

The previously studied cases are two examples of the barriers and hurdles that

victims of corporate related abuses in the supply chain face when they bring a claim in a

home state against the retailers. As previously mentioned, both cases took place in the

United States since the complexity of these cases make it still difficult today to bring

them in Europe.

A number of elements have been learnt from these cases. First of all, about the

relationship between retailers and suppliers, which has to be established by the court in

order to be able to give an outcome on whether or not the retailers are responsible for the

bad working conditions or child labor in the supply chain. This relationship issue was

analyzed in the Wal-Mart case, where the court had to determine whether the plaintiffs

were a joint employer of Wal-Mart and that therefore, Wal-Mart had a duty towards the

employees of its supplier. The distribution of responsibility between the retailer and its

supplier is not evident since there are different degrees of relationships depending on

whether the supplier is the direct supplier of the retailer or an indirect supplier in the

supply chain (one further away in the supply chain). Moreover, whether the retailer is the

only purchaser or one of multiple purchasers creates a difference in terms of the

responsibility that the retailer has towards its supplier. If the retailer is the only purchaser

it will usually have obligation towards the employees of its supplier because it can take

measures when abuses are committed. However, this is more complex in cases of

multiple purchasers.

                                                                                                               146 Collier, R., & Strasburg, J. (September, 2002).

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Secondly, the issue of jurisdiction in these trans-boundary cases can sometimes

lead to the dismissal of the case. The fact that non-US citizens bring a claim in the United

States against a US retailers, for harm that occurred outside the United States, leaves the

court with the question of whether it has jurisdiction over the matter of the case. In the

United States, thanks to the ATS, it is easier for non-US citizens to bring their claim than

in Europe. In the Union Needletrades v. The Gap Inc. et al case, the court had jurisdiction

even though aliens where parties to the case.

Thirdly, these types of cases are often settled out of court, which provides

effective remedy and compensation for the victims of human rights violations. However,

these settlements do not create precedents and therefore, the court cannot base their

judgment on these previous similar cases.

Chapter 4 – Alternative legal options

4.1. The joint employer doctrine

Workers of suppliers have tried a number of strategies to hold retailers liable for

the working conditions in their supply chains. As aforementioned, the distribution of

responsibility and the relationship between retailers and their suppliers is not simple to

define. Some actions have been taken such as the implementation of voluntary codes of

conduct or the implementation of monitoring to inspect the suppliers. Furthermore, new

legislation has been proposed to try to hold retailers accountable for the violations of

human rights in their supply chain.147 These actions have led to some improvements but it

is still difficult for suppliers’ employees to hold retailers liable for their bad working

conditions.

As a result, the Fair Labor Standards Act’s (FLSA) joint employer doctrine has

been used, in the past few years in the United States, by certain lawyers on behalf of

garment employees, in order to show joint liability of suppliers and retailers.148 The joint

employer doctrine is founded on ‘judicial interpretations of the statutory and regulatory

definitions of “employee”, “employ” and “employer”’.149 These regulatory definitions

were characterized by the FLSA, as follows: ‘“employee” as “any individual who is

                                                                                                               147 Lung, S. (2003), p.311-313. 148 Idem, p. 311-313. 149 Idem, p.313-314.

  34  

employed by an employer”150; “employ” as “to suffer or permit to work” 151 and

“employer” as “person acting directly or indirectly in the interest of an employer in

relation to an employee”’152.

The joint employer doctrine cannot be applied in all cases. There is a joint

employer relationship if the work of the workers benefits both employers (retailers and

suppliers). Moreover, the joint employer relationship exists if there is a link between the

two entities, if the workers are working directly or indirectly for the interest of the

employer (here for the retailer as an indirect employer) and if there is direct or indirect

share control over the workers.153 The FLSA does not give specific guidance on how to

apply and interpret this joint employer doctrine. As a result, the court has the

responsibility to define the boundaries for the joint employer doctrine and decide whether

there is a joint employer relationship.154 Does this joint employer doctrine allow victims

of human rights violations in the supply chains to bring more easily a civil liability claim

against the retailers in their home country?

In the case of the retailer and supplier relationship, the joint employer doctrine

can be applied if it can be demonstrated that the suppliers’ employees are indirectly

working for the retailers and that their work is in the interest of the retailers. Due to the

limited guidance on whether or not there is a joint employer relationship and the broad

definition of each of the three terms, the court established a test in order to decide

whether there is such a joint employer relationship in a specific case.155 The test is based

on an “economic reality” test.156 This test allows the court to define whether the workers

are financially dependent of the supposed employer.157 Therefore, if the suppliers are

financially dependent on the retailers, there is a joint employer relationship.

The courts, however, still struggle with framing the factors that need to be used

for the “economic reality” test. The defendants and the victims do not want to use the

same factors, since the defendants are seeking to avoid the joint employer relationship

                                                                                                               150 29 United States Code. § 203(e). Lung, S. (2003), p.313-314. 151 29 United States Code § 203(g). Lung, S. (2003), p.313-314. 152 29 United States Code § 203(d). Lung, S. (2003), p.313-314.  153 Lung, S. (2003), p.313-314 154 Idem, p.313-314. 155 Deines, B. (2005), p.13-14. Lung, S. (2003), p. 316-319. 156 Idem, p. 13-16. 157 Burch, R.J. (2002), p.405-406.  

  35  

whereas the plaintiffs are seeking to demonstrate the joint employer relationship. The

defendants prefer to use the four factors from the Bonnette v. California Health &

Welfare Agency case: (1) power to recruit and to lay off (2) the employer supervises the

work of the employees; (3) payment is chosen by the employer and (4) records of the

employees are kept by the employer.158 The plaintiffs, on the other hands, prefer the five

factors from Brock v. Superior Care, Inc. case: (1) how much control does the employer

have over the workers; (2) do the workers have any occasion for profit or loss; (3) what

initiative do the workers need to perform their work; (4) how long does the working

relationship last and (5) to what extent is the work an integral part of the employer’s

business.159 The non-defined factors for the “economic reality” test leave the court with

either using the factors from the Bonnette v. California Health & Welfare Agency case,

which favor the defendant or the factors of the Brock case, which favor the plaintiffs.

The joint employer doctrine when established by the court can help victims of

human rights violations in the supply chain to bring their case and hold retailers liable for

the harm they suffered. Nevertheless, the court does not always prove the joint employer

relationship as for example in the Wal-Mart case, where the court dismissed the case due

to the lack of joint employer relationship and therefore, Wal-Mart did not owe any duty

towards the employees of its suppliers.160 On the other hand, if the court proves the joint

employer relationship, the retailer will be held accountable for the employees of its

suppliers and therefore, will owe a duty to protect its employees. In June, the National

Labor Relations Board said that McDonalds, the world’s biggest fast-food company,

could be named a joint employer for the workers of its franchise-owned restaurants.161

This would mean that McDonalds could be held liable for the working conditions in its

franchised restaurants.162

The creation of the joint employer doctrine is a real significant creation since

most cases about retailers and suppliers are dismissed in court because the distribution of

responsibility and the relationship between the two is difficult to define. With this

                                                                                                               158 Burch, R.J. (2002),, p. 407-408. This test has been criticized as being biased against a finding of joint employment outside of certain limited situations. 159 Idem, p.408-409. 160 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009). § IV. 161 Choi, C. (July 30, 2014). 162 Idem.    

  36  

doctrine and the “economic reality” tests, the court will have a number of elements to

base its judgment and to determine whether the retailers are responsible for the abuses

committed by their suppliers. Nevertheless, it is today still quite difficult to define the

joint employer relationship since the factors of the “economic reality” test are still not

clearly defined. With the establishment of these factors, the employees of the suppliers

will be able to bring their claim against the retailers and create awareness on the level of

the retailers so as to change the working conditions in their supply chain.

4.2. Claims under ‘deceptive commercial practices’

It is today difficult to hold companies liable for the violation of human rights.

Victims of these corporate related abuses are often left with few judicial resorts to bring

their claim and access effective remedy. As aforementioned, it is even more difficult to

hold a company accountable for abuses committed by their subsidiaries or suppliers. The

distribution of responsibility between the company and its subsidiaries or suppliers is not

always clear. Moreover, the lack of effective legislation and laws, especially in

developing countries where the suppliers are often domiciled, make it a challenge for the

victims to access justice and access remedy. Due to these barriers and obstacles to hold

companies accountable for their actions, some organizations have found other grounds to

legally sanction multinational companies. These organizations such as Sherpa, Action

Aid and Clean Clothes Campaign (CCC), bring claims against multinational corporations

under ‘deceptive commercial practices’. They declared in a joint press release: ‘the

launch of this investigation could for the first time in Europe, explore the legal

ramifications of the gap between the ethical communication of some firms and the actual

practices that they tolerate and from which they benefit’.163

These three organizations brought a claim against the French international retail

group Auchan. Auchan’s label In Extenso was found in the rubble of the Rana Plaza

building and therefore, its ethical claims were challenged.164 The limitation of French law

on corporate responsibility left Sherpa, Action Aid and CCC no other choice than to sue

                                                                                                               163 Petitjean, O. (July 4, 2014). 164 Idem.

  37  

Auchan for ‘deceptive commercial practices’.165 The public prosecutor of Lille started the

investigation one year after the collapse of the Rana Plaza building, to investigate

whether Auchan misinformed its consumer concerning the labor conditions in its supply

chain. Sherpa (a French organization) also brought a similar case against Samsung, who

used their code of conduct as an advertising method, but without respecting it in their

supply chain.166 These two legal actions are still ongoing and therefore, the court has not

yet given an outcome. These sanctions and legal claims do not allow victims to access

remedies and get compensation but it allows organizations to legally sanction these

multinational corporations and therefore, tackle the issue of human rights and businesses

in another legal way.

In 1998, a case was filed by Kasky against Nike regarding unfair and deceptive

practices under California’s Unfair Competition Law and False Advertising Law.167 The

bad working conditions in Nike’s suppliers were reported in the news. Nike denied these

accusations in press releases and public statements and Kasky claimed that these

statements contained false information.168 Nike stated that it had freedom of speech to

make such statements and the court agreed and dismissed the case.169 Kasky appealed

that decision of the court and also appealed the decision of the California Court of

Appeals. The California Supreme Court reversed the lower court’s ruling and Nike

appealed. The case went to the United States Supreme Court but was dismissed. As a

result, in 2003, instead of wasting more money in lawsuits, Nike and Kasky decided to

settle the case out of court for $1.5 million and improve the working conditions in the

supply chain by implementing auditing programs and by financing educational

programs.170 This sum was paid to the ‘Fair Labor Association, an American organization

bringing together companies, universities, consumer associations and NGOs’ for them to

assess the working conditions in the supply chain.171

                                                                                                               165 Petitjean, O. (July 4, 2014).  166 Idem. 167 Business and Human Rights Resource Center, see Kasky v. Nike. (http://business-humanrights.org/en/nike-lawsuit-kasky-v-nike-re-denial-of-labour-abuses-0#c9325) 168 Idem. 169 Idem. 170 Queinnec, Y. (2007), p. 31-32. 171 Idem, p.31  

  38  

The Kasky v. Nike case was settled out of court ten years before Sherpa, Clean

Clothes Campaign and Action Aid decided to bring claims against multinational

companies for their deceptive commercial practices. A decade later, these organizations

are suing companies under this legal basis in order to sanction these companies that use

their code of conduct for their good image and reputation when in reality, workers in their

supply chain are working long hours for low pays with non-humane conditions. These

cases are today in Europe a way to sanction companies and tackle the problem of

business and human rights. However, these legal actions on the basis of deceptive

commercial practices do not provide access to remedy for the victims of these corporate

related abuses but help create awareness in today’s society and sanction companies for

their misleading advertisement. Cases such as Nike in the United States or Auchan in

France have made companies aware of the consequences of such legal action. This

awareness led Nike, in 2005, to publish a report with the list and locations of its

production workshops.172 As a result, certain companies now ask organizations such as

Sherpa, Clean Clothes Campaign or Action Aid to help them avoid these legal costs.173

Chapter 5 – Conclusion

Victims of corporate related abuses in developing countries bring their cases

before the European Union Member States and United States home courts of their

retailers, so as to obtain effective remedy and compensation. The corrupt legal systems,

in their developing host countries, as well as the insolvency of the local employers, incite

these victims to file their claims against the retailers in their home states.

In the wake of globalization, human rights and environmental abuses happen all

over the world. However, the legal frame of all countries has not evolved globally at the

same time. Therefore it is extremely difficult for victims of corporate related abuses to

hold their retailers accountable, through trans-boundary cases.

Trans-boundary civil claims against European retailers in their home courts,

would not lead to effective remedy and compensation, due to the fact that the relationship

between retailers and suppliers is still a legal grey area. The European legal infrastructure

                                                                                                               172 Queinnec, Y. (2007), p. 31-32. 173 Idem, p. 31-32.

  39  

presently does not provide victims of corporate abuse in the supply chain with viable

legal routes to obtain the retailers’ accountability for human rights abuses.

Even under the more favorable United States legal system, it is extremely difficult

for developing-host-country victims to hold retailers liable and to obtain redress. The

trans-boundary civil claims can be brought either under United States common tort law or

under ATS (Alien Tort Statute). The outcome of the Kiobel v. Royal Dutch Petroleum

Co. case in 2013, in the United States Supreme Court, creates a high uncertainty as to the

possibility to hold retailers accountable for corporate related abuses in host countries

under ATS and as such make it practically impossible to obtain effective remedy and

compensation. However, under United States common tort law it is more feasible for

developing-host-country victims to obtain redress, in spite of numerous legal barriers to

overcome.

Since the retailers’ Codes of Conduct and Charts (non-binding soft law) are not

mandatory for the supply chain companies in host countries and in the absence of serious

legal constraints (binding hard law) forcing all companies to prevent all human rights and

environmental risks, the victims of corporate related abuse will continue to face complex

legal barriers and remain uncertain as to obtaining redress.

In order for victims, who suffered harm in developing countries, to be able to file

civil liability claims under better conditions, in the Western courts, Europe and the

United States would have to rectify the existing gap in legal protection by creating more

open procedural requirements. It remains to be seen, whether both European and United

States policy makers are willing to develop a less hostile climate for human rights victims

to file their claims against retailers in the home countries.

In the absence of more open and viable legal routes for developing-host-country

victims, improvement can presently only come from organizations as Sherpa, Clean

Clothes Campaign and Action Aid, suing retailers (multinational companies in general)

on different grounds, such as deceptive commercial practices. Through these alternative

cases, the light is shed on the terrible human and civil rights abuses of these companies,

resulting in people’s awareness on these cases and therefore maybe leading to tangible

improvements in the working conditions in the supply chains in developing countries.

In the United States, the alternative strategy to hold retailers liable for corporate

  40  

related abuse under the joint employer doctrine has proven to be complex in cases dealing

with a retailer supplier relationship.

As long as multinational corporations and retailers do not resolve to taking drastic

and binding Corporate Social Responsibility initiatives, forcing all companies in the

supply chain to prevent human rights and environmental risks, human rights violations

will continue to occur and victims of corporate related abuses will continue to bring their

claims before home state courts against retailers. This situation will most probably

provoke further discussions on the subject and possibly lead to changes in the global legal

frameworks.

  41  

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Case Law:

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-­‐ Doe I v. Unocal Corp., 395 F.3d 932 (9th Cir. 2002). -­‐ Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009). -­‐ Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659, 1663 (2013). -­‐ Nike, Inc. v. Kasky, 539 U.S. 654, 656–58 (2003). -­‐ Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474

(Cal. Sup. Ct. filed 23 Sept. 1999).