Activists have launched a legal case against German discount retail chain KiK

Activists have launched a legal case against German discount retail chain KiK

There is growing pressure from activists and governments to make Western laws apply to alleged non-compliance in developing country garment factories. But be careful what you wish for, advises Mike Flanagan, who points out that the most likely outcome is that countries will be blacklisted with no effort to improve standards.

Two fires and one building collapse at Pakistani and Bangladeshi garment factories between September 2012 and April 2013 killed at least 1,600 people. No-one has been tried for any of these disasters.

In December 2013, a fire at an Italian factory killed seven Chinese garment workers. In January this year, an Italian court found three factory managers guilty of manslaughter, sentencing them to between six and nine years’ imprisonment.

You can see why activists believe that using Western courts will prevent human rights abuses in developing country garment factories.

I think those activists are dangerously misguided, but many disagree:

  • California passed a Transparency in Supply Chains Act in 2010. It requires retail sellers and manufacturers operating in the state, with worldwide sales over $100m a year, to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains.
  • The UK’s Modern Slavery Bill, likely to become law within the next few months, imposes similar requirements on all businesses operating in the UK (probably above a similar sales level) – but extends that obligation to all their supply chain, not just direct suppliers.
  • Some US Federal Courts of Appeal, under the 1789 Alien Torts Statute, now accept cases against foreign companies over alleged human rights offences committed abroad. In September, the California Circuit ruled that Nestlé – a Swiss company – could be sued in the US over alleged child slavery in Ivory Coast farms that had sold cocoa to a Nestlé supplier. No evidence was offered that the cocoa had entered the US or that Nestlé knew about the alleged slavery.

Activists think we need even more of this extraterritorial use of Western laws. Campaigners against a coercive Indian version of apprenticeship (called sumangali, operated in some Southern Indian spinning mills) are arguing, before the UK law is even passed, that it should be extended to allow victims of foreign rights abuses to seek compensation from UK buyers in UK courts.

Enthusiasm for this isn’t universal though, and dissent doesn’t just come from Indian mill owners resenting Western interference. Most Indians are proud of India’s independence movement - and few want their businesses governed by the London Parliament again.

The idea isn't that popular in the West, either:

  • A US Congressman tried to extend the California requirement nationally in June 2014. He failed.
  • Deputies from the ruling French socialist party voted in January 2015 to put off a clause in a new business-efficiency law that would have imposed greater legal accountability on French buyers than the UK’s Modern Slavery Bill.
  • The New York area Federal Appeals Court ruled in 2013 that the 1789 statute didn’t mean Britain’s Shell could be sued in the US over the Nigerian government’s human-rights violations in Shell’s Nigerian oilfields.
  • The US Government argued before the Appeals Court that the Statute (only twice used successfully in its first 190 years) wasn’t passed to impose modern American morality on foreign companies. If Americans wanted to do that, it argued, Americans should debate a new law.

The South Asian disasters certainly seem to have brought out activists’ ingenuity:

  • A consortium of French human rights organisations complained to public prosecutors in April 2014 that supermarket chain Auchan had broken “truth in advertising” laws: Auchan’s bland comments about its safety procedures didn’t quite gel with stickers from its private-label garment brand being found in the rubble of the collapsed Bangladesh Rana Plaza factory.
  • A German activist group announced on 8 February it was starting a case against German chain KiK in German courts over its garments being found in the burnt-out Ali Enterprises factory in Pakistan.

Ingenuity isn’t always enough: just before the French socialists’ vote, prosecutors announced they could find no evidence to justify prosecuting Auchan in France. Those German activists admit: “We cannot guarantee anything or even state the probability of winning this case. The odds are against us” - and still won’t reveal what German law they claim KiK has broken. 

Western lawyers and their like love all this though.

The UK is awash with advice to retailers about avoiding prosecution under the Modern Slavery Bill – but it is advice about record-keeping and phraseology, not buying ethics. The two different US court decisions have produced advice to hire more lawyers before buying anything else abroad.

The Nestlé case refers to alleged abuses in 2005; the 2014 decision just lets the claimants sue. A final decision will take years. The 2013 Shell decision was about Nigerian dissidents executed in 1995. Both cases will just mean a 20-year boost to US lawyers’ job prospects.

Amid all this fuss, no-one has produced any evidence that California's Transparency in Supply Chains Act or the 1789 Statute has prevented a single human from being trafficked. The arguments have been about “shoppers having the right to know” versus the practicalities of enforcement. There was much talk about the horrors of trafficking; little about how to stop it – and none at all about eliminating the poverty in the developing-world that makes trafficking profitable.

Nor did the Act do anything to make California’s best-known brand – Walt Disney – inspect Ali Enterprises in the three years between the Act’s passing and investigators finding work in progress for Disney-branded garments among the factory’s post-fire wreckage.

But I believe the Act did lead to Disney keeping its lawyers happy by banning its suppliers from sourcing any more garments from Pakistan – increasing Pakistani unemployment, but doing nothing for factory safety or human rights.

Calls for these extraterritorial laws are fashionable right now, and we’ll probably see more countries going down the UK’s route, but some also following France’s. We’ll also see some buyers following H&M’s strategy (keep buying from stressed countries, but work to improve standards), and others adopting the Mickey Mouse cop-out of running away.

If most countries follow the British route, there’ll be more pressure on companies from shareholders and consultants to follow Disney’s example than H&M’s.

Activists should be careful what they campaign for. If they get it, they may destroy tens of millions of jobs in the world’s poorest countries.