Attempts to establish legal accountability among western corporations for health and safety standards in their international supply chains are growing. The developments stem largely from the law of tort -- where harm caused unfairly to another can result in civil legal liability for the person or body causing it. Alleged failures to uphold duties of care have stimulated court claims. Some are in the early stages; others have failed due to jurisdictional issues and causative factors. But their emergence signals a willingness on the parts of the courts to consider the responsibilities of companies across global chains.
The corporate social responsibility (CSR) and governance statements that companies make are important to establishing a duty of care. In the cases discussed below, the link between these statements and the potential for liability is a factor. In the future, it may be that companies will need to be more careful with the content of those statements.
Though the current developments are interesting, the path to establishing liability is far from straightforward. The twin obstacles of jurisdiction and corporate structure remain to be navigated successfully.
A case in point is the aftermath of the Rana Plaza disaster in Bangladesh in 2013, in which 1,250 people died and hundreds more were injured following the collapse of an eight-storey illegally-built garment factory. A claim in the US against retailers JCPenney, The Children's Place and Wal-Mart Stores for negligence and wrongful death in relation to unsafe working conditions failed but provided an opportunity to explore the issues (bit.ly/2l2BLAD).
Lawyers representing the family of Sharifa Belgum, a 30-year-old mother of four who died in the collapse, and Mahamudul Hasan Hridoy, a factory inspector who was injured, put forward arguments which included the fact that all three companies had CSR statements that committed them to ethical sourcing.
One issue that led to ultimate defeat of the claim was that it was filed outside Bangladesh's one-year limitation period. Second, but more substantial, was that the judge ruled on the facts that there was no duty of care because the defendant companies did not employ the victims.
Soon after this judgment came a statement of claim filed in the Ontario Superior Court of Justice against Canadian retail giant Loblaw and inspection and certification agency Bureau Veritas (bit.ly/2lBh2H9). Lawyers at Rochon Geneva are aiming to establish a duty of care by Loblaw to victims and their families and are seeking punitive damages of C$150m (£91m).
Again the claim is for wrongful death and injury with the appalling safety failings at Rana Plaza stimulating the C$2 bn (£1.2bn) class action on behalf of the survivors, families and the estates of the victims. The core of the action is that Loblaw, in sourcing garments for its Joe Fresh brand, breached its duty of care to the victims.
The claim details the company's close connection with the Bangladesh garment industry. There had been several disasters in earlier years when factories had collapsed or burned to the ground. The company sourced goods from numerous Bangladeshi factories and had done so for a long period. As a result, the claim alleges that Loblaw "knew or ought to have known" about the safety vacuum at Rana Plaza. It also alleges that Bureau Veritas, which carried out factory inspections on behalf of Loblaw, failed in its duty of care to carry out adequate checks.
The claim highlights Loblaw's public statements about its CSR policies and links those statements to an alleged duty of care. It is not clear whether the claim will prosper in the Canadian courts.
Out of Africa
In the English courts, the Vedanta litigation (Lungowe v Vedanta Resources plc) permits some useful analysis of duty-of-care arguments, as well as questions of jurisdiction and parent/subsidiary liability (bit.ly/2kTShlo). The case concerned an action on behalf of 1,826 Zambian villagers -- though it is likely there will be more claimants. The claim detailed personal injury, loss of income and loss of amenity and enjoyment of land from pollution and environmental damage caused by the operation of the Nchanga copper mine. As with the Loblaw claim, the claimants are not employees of Konkola Copper Mines -- a Zambian subsidiary of UK-based Vedanta, which owned and operated the mine.
Justice Peter Coulson had to decide whether there was a "real issue" between the claimants and Vedanta, and whether to set aside applications that sought to declare either that the court did not have the jurisdiction or should not exercise it and there should be a stay of proceedings. It opened the way for the court to consider seminal ground; in essence, the three-stage test in Caparro Industries v Dickman: foreseeability, proximity and whether the claim was fair, just and reasonable.
In deciding that the Vedanta litigation could go forward, Justice Coulson also reviewed cases where it was held that parent companies owed a duty of care to employees of their subsidiaries. One case, Lubbe v Cape plc provides the possibility of non-employees successfully claiming for harm across a supply chain (bit.ly/2lHkPjB).
Again, the issue of statements Vedanta made in its Embedding Sustainability report appears to have been a factor in the factual matrix allowing the litigation to move forward. One of these said: "We recognise the level of control and sphere of influence the group has over these operations -¦ our commitment to corporate sustainability requires constant monitoring and diligence."
In August 2016, in an important early-stage decision in Germany, the regional court in Dortmund accepted jurisdiction and agreed to provide legal aid to claimants against German discount clothing retailer Kik after a fatal fire at a garment factory in Pakistan in September 2012.
Ali Enterprises in Karachi was producing jeans for Kik when a fire broke out, killing 260 workers and injuring another 32. Many of the factory's windows and exits were barred, leaving workers to suffocate or burn to death.
Kik was the factory's major client and, though it did not employ the victims, it had agreed a code of conduct with the suppliers that covered workplace safety. Kik agreed voluntary support for the victims' families, but they are seeking legally enforceable compensation. When the court deals with substantive points of law, it is likely that the company's CSR statements will play an important part in establishing liability.
Meanwhile there have been attempts at statutory interventions that signal an increased drive toward implementing due diligence checks across supply chains. In France, the Devoir de Vigilance (duty of care) Bill aims to promote due diligence checks that will help to avoid human rights violations on the part of parent companies and their subsidiaries and subcontractors. The draft bill, adopted by the National Assembly -- the French parliament's lower house -- in December, imposes a duty of care for firms with more than 5,000 employees in France or more than 10,000 in France and abroad.
These companies will have to publish "vigilance plans", including measures to identify and prevent infringements to human rights, risks of serious injuries, or harm to health or the environment resulting directly or indirectly from their activities.
So far the proposed law has received a mixed response, not surprisingly from those who fear it will inhibit the ability of French companies to compete in the international market. If adopted, however, the law may encourage other countries in the European Union to follow suit.
Ebb and flow
In the US, the Alien Torts Claims Act (ATCA) of 1789 allows federal courts jurisdiction in certain circumstances for civil actions by an alien for a tort committed in violation of the law of other nations or a treaty of the United States. In the 1990s, the 223-year-old law appeared to provide a pathway. That pathway has recently been curtailed in Kiobel v Royal Dutch Petroleum (bit.ly/2kUCo33). This decision makes it clear that the ATCA is subject to a "presumption against extraterritoriality" and usually will not apply to claims involving alleged human rights abuses or other violations of international law alleged to have occurred in foreign countries.
Kik was the Karachi factory's major client and agreed a code of conduct with the suppliers that covered workplace safety
In the UK, the law is extending companies' liability for actions overseas in their names. Both the Modern Slavery Act (MSA), and the Bribery Act have the capacity to regulate supply chain accountability. Although it is not concerned directly with issues of health and safety, s 54 of the MSA compels companies with a turnover of more than £36m to publish a slavery and trafficking statement each financial year. In this, the company must make clear the steps it has taken to ensure supply chain compliance.
The extra-territorial reach under s 7 of the UK Bribery Act means that companies can commit an offence of failure to prevent bribery if an employee, subsidiary, agent or service provider bribes another person anywhere in the world to obtain or retain a business advantage. Further, the parent company can be liable if a foreign subsidiary commits an act of bribery when performing services on its behalf.
The Vedanta and Kik litigation and the statement of claim from Rochon Geneva against Loblaw all have the potential for interesting legal arguments about the traditional scope of tortious liability with familiar arguments on foreseeability of the harm and proximity of the claimants.
At the same time they raise some novel issues, combining the orthodoxy of company law as a potential barrier and the influence of "soft law" in the shape of CSR helping confirm the existence of a duty. Forms of due diligence statutory intervention, such as that in France, may stimulate other countries to follow suit, while the advances in statutory criminal offences discussed above may also have their place in shaping the response to supply chain accountability more generally.
But for the present it is the law of tort, specifically actions alleging negligence, which appear to have the most potential resonance for health and safety law.