Editor’s note: Maisie Biggs graduated with a MSc in Global Crime, Justice and Security from the University of Edinburgh and holds a LLB from University College London. She is currently working with the Asser Institute in The Hague.  She has worked for International Justice Mission in South Asia and the Centre for Research on Multinational Corporations (SOMO) in Amsterdam.

The Rome Statute is a central pillar of international criminal law (ICL), and so any discussion concerning the subjection of legal persons requires a revisit of the negotiations surrounding its drafting. However in the time since its implementation, there appears to have been a shift in ICL regarding corporate liability. Developing customary international law, treaty law and now most domestic legal systems have some established mechanisms for prosecuting legal persons for violations of ICL.

The Rome Statute

A lot has been written on the negotiations surrounding the drafting of the Rome Statute of the International Criminal Court (Rome Statute). This document established the International Criminal Court (ICC), its rules and jurisdiction, and codified the core crimes of ICL and surrounding general principles. Article 25(1) of the Rome Statute explicitly restricts the court’s jurisdiction to natural persons, meaning that corporate wrongdoing may only be approached by the ICC through individual criminal responsibility or superior responsibility for corporate actors.^[1] The Statute was a “major achievement”^[2] as the first international law instrument essentially summarising the general principles of criminal law across national legal systems.^[3] Concerns about ‘complementarity’ arose as the ICC would be expanding the reach of ICL far beyond the remit of ad hoc Tribunals like those used to try crimes in Rwanda and Former Yugoslavia. The new Court needed to complement, rather than undermine national courts and jurisdiction.^[4]

During negotiations, individual responsibility of legal persons, corporations or criminal organisations was described as “a major political issue on which political guidance from the Committee was needed.”^[5] France had submitted a compromise proposal in the International Criminal Court Draft Statute of 1998 concerning the inclusion of responsibility of legal persons. The French representatives surmised that resistance from other states to its inclusion was because there was no equivalent in some domestic legal systems, while others held the view that the concept would be misapplied in an international criminal court.^[6]

The French proposal linked the responsibility of the legal persons with the responsibility of criminal organisations at Nuremberg. Under this proposal, group responsibility would be linked with the previous commission of a crime by a natural person (thus in no way concealing individual responsibility), and adopting in parts Article 10 of the Charter of the Nuremberg International Military Tribunal,^[7] the Court would make binding determinations on the criminality of an organisation, which states would need to implement and then penalise by fines or proceeds of crime confiscation.^[8]

The proposed text was as follows:

“[Art 23(5)]: Without prejudice to any individual criminal responsibility of natural persons under this Statute, the Court may also have jurisdiction over a juridical person under this Statute. Charges may be filed by the Prosecutor against a juridical person, and the Court may render a judgement over a judicial person for the crime charged, if:

(a) The charges filed by the Prosecutor against the natural person and the juridical person allege the matters referred to in subparagraphs (b) and (c); and

(b) The natural person charged was in a position of control within the juridical person under the national law of the State where the juridical person was registered at the time the crime was committed; and 

(c) The crime was committed by the natural person acting on behalf of and with the explicit consent of that juridical person and in the course of its activities; and

(d) The natural person has been convicted of the crime charged.

For the purpose of this Statute, ‘juridical person’ means a corporation whose concrete, real or dominant objective is seeking private profit or benefit, and not a State or other public body in the exercise of State authority, a public international body or an organisation registered, and acting under the national law of a State as a non-profit organisation.”^[9]

This was a compromise solution from France between liberal and romantic conceptions,^[10] looking not only to convict ultimately the company or organisation, but rather still use it as a mechanism for attributing responsibility to individuals.^[11] Several countries supported the concept, however prevailing concerns of enforcement and complementarity remained, especially for countries with no basis of corporate criminal liability. The matter was referred to the Working Group following mixed reception from states, however once there, negotiations met stifling time pressures.^[12] Per Saland, the Chairman of the working group which negotiated issues surrounding Part 3 of the Rome Statute concerning these general principles of criminal law (including Article 25 on individual responsibility), has since revealed that time ran out for the Working Group when it came to discussion of some more difficult issues, including liability of legal persons.^[13] David Scheffer, who was also involved in the negotiations, has confirmed that the combination of time pressures and complementarity concerns prevented the proposal from succeeding, however he has added that another contributing factor was a more fundamental concern that the “novelty” of the proposed corporate criminal liability would have “imperilled” the entire treaty’s ratification by states.^[14]

No agreement was reached concerning subjecting legal persons. Article 25(3)(d) retained a reference to a ‘group of persons acting’,^[15] so the French idea of individual participation in a larger collective was incorporated to an extent, however all references to legal persons have been removed in the final article. Perhaps unintentionally, a similar door for corporate liability remained ajar in article 7(2)(a), through reference to organisational policy.^[16] In the ICC investigation into the Kenyan situation,^[17] the Court examined this issue:

“Clearly, the 'organization' is an entity different from a "State" if the legislator was to avoid redundancy. Thus, it is permissive to conclude that an 'organization' may be a private entity (a nonstate actor) which is not an organ of a State or acting on behalf of a State [para 45].”

The Court delineated various ‘state-like’ characteristics that a non-state actor would have to demonstrate in order to qualify as an organisation under this article,^[18] however none expressly excluded legal persons like companies from the article’s ambit. 

Andrew Clapham provides an in-depth history of the Rome Statute negotiations, and how controversial this question of legal persons became.^[19] This episode has been treated as a definitive rejection of ICL liability for legal persons,^[20] however the Rome Statute is just one (important) part of the larger ICL picture.

Post-Rome caselaw developments 

Since Rome, customary international law through Tribunals, treaty law, and domestic law have all developed. Most notably, for the first time legal persons have been subjected under ICL by an international criminal tribunal.^[21] In the Al Jadeed S.A.L. & Ms Khayat (New TV S.A.L.)^[22] case, an Appeals Panel for the Special Tribunal for Lebanon (STL) overturned a decision that the Tribunal lacked jurisdiction over legal persons on 2 October 2014, allowing the case to proceed against the corporate entity Al Jadeed S.A.L. and natural person Ms Khayat. This was then followed by another contempt case Akhbar Beirut S.A.L., similarly against a legal and natural person.^[23] In New TV S.A.L., Judge Baragwanath acknowledged the development of domestic corporate accountability, and so determined that international criminal law has likewise progressed:

“Corporate liability for serious harms is a feature of most of the world’s legal systems and therefore qualifies as a general principle of law. Where States still differ is whether such liability should be civil or criminal or both. However, the Appeals Panel considers that… corporate criminal liability is on the verge of attaining, at the very least, the status of a general principle of law applicable under international law.”^[24]

The decision has been met with a mixed reception. Filled with “historical references and normative ambition,”^[25] some commentators have characterised the decision as an encouraging progression from state practice and foundation stone for future ICL criminal liability.^[26] However the basis of Judge Baragwanath’s decision has been described by Dov Jacobs as a “molotov cocktail to kill the principle of legality” as the judge’s reasoning relied only on “the ‘spirit’ of the statute combined with inherent jurisdiction.” Others have found the later Akhbar Beirut S.A.L. opinion more convincing due to its more concrete basis in Lebanese law.

The Tribunal very consciously restricted their consideration and findings to the specific crime of contempt: looking to precedent, they examined only whether there had been previous findings on contempt with regards to legal persons in the various international criminal tribunals, and found there had “simply been no legal pronouncement on this specific issue.” ^[27] The Tribunal drew its power to prosecute for contempt from its inherent jurisdiction as a judicial institution.^[28] Like the ICTY and ICTR before it, the STL’s primary jurisdiction for ‘core’ international crimes is explicitly over only natural persons, however the separate framework in the general Rules of Procedure and Evidence allowed the Tribunal to consider the broader definition of ‘persons’ for contempt.  The importance of this distinction for the case does also support Andrew Clapham’s argument that “at this point, the exclusion of non-natural persons can be seen as the consequence of a ‘rule of procedure’ rather than the inevitable result of application of international criminal law.”^[29]

There is debate about the broader applicability of these decisions, because of the STL's ties to Lebanese law. The STL itself is a partially-domestic forum which reduces the ICL significance of an ‘international tribunal’ taking this step. The legal basis for the Tribunal’s decisions is at least partially grounded in Lebanese law -  Article 2 of the formative statute of the STL mandates the use of Lebanese law (under which corporate criminal liability is possible) - however it is debatable whether this case is purely an instance of domestic legal application of international criminal law. Article 2 concerns only the applicable criminal law, (i.e., the ‘core crimes’ discussed above) and not the procedural rules on which this decision was based, which are grounded in international law concerning international tribunals. It would then appear that the legal basis for this decision was purely international, and the Tribunal in New TV S.A.L. accordingly based their decision on  “current international standards,”^[30] however in the Akhbar Beirut S.A.L. case the Tribunal links back the foreseeability of this corporate prosecution to Lebanese law: “It would be an oddity for a Lebanese company to face criminal sanction in Lebanon for interfering with the administration of justice with respect to cases before Lebanese courts and at the same time enjoy impunity for similar acts before an internationalised Tribunal guided by Lebanese law in carrying out its judicial work.“^[31]

The highest profile media case last before an international tribunal also concerned the responsibility of legal persons. The International Criminal Tribunal for Rwanda (ICTR) had a special focus on the media’s role of incitement in the Rwandan genocide.^[32] As the Tribunal in the Akayesu case positively quoted: “it was impossible that hundreds of thousands of people should commit so many crimes unless they had been incited to do so.”^[33] The ICTR case of Prosecutor v. Nahimana et al.^[34] (also known as the Media Case) tried three natural persons for their roles in inciting the Rwandan genocide. Two of these were the controlling figures of media organisations: RTLM was a radio station and Kangura a publication. The court found a specific “specific causal connection” between RTLM broadcasts and the killings, which “engaged in ethnic stereotyping …[which] called explicitly for the extermination of the Tutsi ethnic group.”^[35] The articles published by Kangura similarly had the impact of “whipping the Hutu population into a killing frenzy.”^[36] What was distinctive about this case was that the court, before outlining the individual responsibility of the named accused, went into great detail about the culpability of the organisations in question. The court named the media organisations themselves as responsible for inciting genocide: “If the downing of the [President’s] plane was the trigger, then RTLM, Kangura and CDR were the bullets in the gun.”^[37] It was not possible under the ICTR’s jurisdictional mandate to subject legal persons and so the court in the Media case did not broach this issue, however the structure and substance of the court’s reasoning centred primarily on the responsibility of the organisations, and only after did the court then address the roles of the natural persons who were actually on trial.

What may merit further investigation is how media cases before international tribunals differ from the prosecution of other international crimes that corporate actors engage in, such as pillage or complicity. The media acts as the ‘fourth estate’, a fundamental and (ideally) independent pillar of a functioning system of democratic governance. Arguably then, media companies are not purely private, non-state actors but serve a partially civic function, and so are in some ways fundamentally different actors than other corporate entities.^[38] How the unique role of this specific ‘private’ actor impacts its liability under ICL warrants further investigation.

International instruments imposing some form of corporate liability

A growing number of recent international treaties and conventions are incorporating obligations to impose sanctions on legal persons.^[39] These include the Optional Protocol on the Convention on the Rights of the Child (Article 3(4)), Convention Against Transnational Organised Crime 2000 (Article 10(2)), and Convention Against Corruption 2003 (Article 26 (2)). As pointed out by Sabine Gless and Sarah Wood, these instruments remain vague about implementation.^[40] Nonetheless, for these crimes states are required in some form to impose sanctions on legal persons.^[41]

The Draft Articles on Crimes Against Humanity being prepared by the International Law Commission (ILC) may go the same way as the afore-mentioned draft of the Rome Statute, but for now Draft article 6, paragraph 8 contains explicit subjection of legal persons:

“Subject to the provisions of its national law, each State shall take measures, where appropriate, to establish the liability of legal persons for the offences referred to in this draft article. Subject to the legal principles of the State, such liability of legal persons may be criminal, civil or administrative.”

This final sentence allows for flexibility in domestic application, however the offences being contemplated are international crimes. This convention is being designed to be a development from the Rome Statute, the “next generation” of legal tools concerning crimes against humanity.^[42] The addendum to the ‘Fourth report on crimes against humanity’ drafted by Sean D. Murphy, Special Rapporteur of the ILC, links this article with the previously mentioned international law instruments which are subjecting legal persons.

Conclusion

The ICC is as yet not touched by these developments, however there are glimmerings of a shift in customary ICL. As will be explored in the next post in this series, most domestic legal systems now have established mechanisms for prosecuting legal persons for violations of ICL. The Rome Statute negotiations surrounding the subjection of legal persons were centralised on complementarity; if domestic law has fundamentally shifted in the interim period it makes sense that this issue be revisited in international caselaw and international instruments as well.

^[1] David Scheffer, ‘Corporate Liability under the Rome Statute’ (2016) 57 Harvard International Law Journal Online Symposium 35, 35.

^[2] Per Saland, ‘International Criminal Law Principles’ in Roy S Lee (ed) The International Criminal Court: The Making of the Rome Statute (Kluwer Law International NL, 1999) 190-191.

^[3] ibid.

^[4] Andrew Clapham, ‘The Question of Jurisdiction under International Criminal Law over Legal Persons: Lessons from the Rome Conference on an International Criminal Court’, in Menno Kamminga and S Zia-Zarifi (eds), Liability of Multinational Corporations Under International Law (Kluwer Law International, 2000) 139, 142.

^[5] ‘Summary records of the plenary meetings and of the meetings of the Committee of the Whole’ in Official Records of the United Nations Diplomatic Conference of Plenipotentiaries on the Establishment of an International Criminal Court, Rome, 15 June-17 July 1998, Vol. II, UN Doc. A/Conf.183/C.1./L.3, 132.

^[6] ibid 133.

^[7] Clapham (n 4) 147.

^[8] ‘Summary records of the plenary meetings and of the meetings of the Committee of the Whole’ (n 5) 133.

^[9] ‘Working paper on article 23, paragraphs 5 and 6, UN Doc. A/Conf.183/C.1/WGGP/L.5/Rev.2, 3 July 1998’ in Official Records of the United Nations Diplomatic Conference of Plenipotentiaries on the Establishment of an International Criminal Court, Rome, 15 June-17 July 1998, Vol. III, 252.

^[10] “A liberal conception of responsibility focuses on individual agency and abstracts individual wrong from collective action. The ‘romantic’ view admits that international crimes are typically by their very nature committed in collectivities, and thus closely connected to some degree of collective will. The two traditions have been in conflict since the naissance of international criminal law.” in Carsten Stahn, ‘Liberals vs. Romantics: Challenges of An Emerging Corporate International Criminal Law’ (2018) 50 Case W Res J Intl L 91, 99.

^[11] ibid, 100.

^[12] Saland (n 2) 194.

^[13] ibid.

^[14] Scheffer (n 1) 38.

^[15] See the Case Matrix Network commentary on Article 25(3)(d) for the relationship between this and the doctrine of Joint Criminal Enterprise (JCE).

^[16] “‘Attack directed against any civilian population’ means a course of conduct involving the multiple commission of acts referred to in paragraph 1 against any civilian population, pursuant to or in furtherance of a State or organizational policy to commit such attack” [emphasis added].

^[17] Decision Pursuant to Article 15 of the Rome Statute on the Authorization of an Investigation into the Situation in the Republic of Kenya: ICC-01/09-19-Corr 01-04-2010 110/163

^[18] “[para 68] As I have endeavoured to demonstrate above, certain criteria need to be satisfied to qualify a non-state actor as an 'organization' under the ambit of article 7(2)(a) of the Statute. This state-like 'organization' is the author of a policy "to commit such attack" against any civilian population which is implemented by its members using the means of the 'organization'. As in case of a State policy, it seems to me that the "organizational policy" must be established at the policymaking level of the ‘organization'."

^[19] Clapham (n 4) 142.

^[20] This negotiation process was used as a basis for the UK and Netherlands Amici Curiae brief in the Kiobel case, which argued that there was no corporate liability under international criminal law: “corporations have been deliberately excluded from the jurisdiction of the International Criminal Court.” Brief of the Governments of the United Kingdom of Great Britain and Northern Ireland and the Kingdom of the Netherlands as Amici Curiae in support of the Respondents (No. 10-1491) (filed 3 February 2012), 17.

In the Jesner v. Arab Bank, PLC decision, the negotiation process was cited by both Justice Kennedy in the lead decision [p 15] and Justice Sotomayor in her dissent [p 8], the former using it as evidence of ICL's rejection of corporate liability, and the latter characterising it as evidence merely of varying domestic practices and not a definitive rejection of corporate civil liability under the Alien Tort Statute (as was one of the issues in this case).

^[21] Nadia Bernaz, ‘Corporate Criminal Liability under International Law: The New TVS.A.L. and Akhbar Beirut S.A.L. Cases at the Special Tribunal for Lebanon’ (2015) 13 Journal of International Criminal Justice, 313, 313.

^[22] New TV S.A.L, Decision on Interlocutory Appeal Concerning Personal Jurisdiction in Contempt Proceedings, Al Jadeed S.A.L. & Ms Khayat (STL-14-05),, Special Tribunal for Lebanon Appeals Panel (2 October 2014).

^[23] Akhbar Beirut S.A.L., Decision on Interlocutory Appeal Concerning Personal Jurisdiction in Contempt Proceedings, Case No STL-14-06/PT/AP/AR126.1, 23 January 2015.

^[24] New TV S.A.L. (n 22) para 67.

^[25] Stahn (n 10) 98.

^[26] See Nadia Bernaz (n 21).

^[27] New TV S.A.L. (n 22) para 41.

^[28] As articulated in Rule 60 bis (A) [Contempt and Obstruction of Justice] of the Rules of Procedure and Evidence for the STL.

^[29] Andrew Clapham, ‘Extending International Criminal Law beyond the Individual to Corporations and Armed Opposition Groups’ (2008) 6 Journal of International Criminal Justice 899, 902.

^[30] New TV S.A.L. (n 22) para 60.

^[31] Akhbar Beirut S.A.L. (n 23) para 59.

^[32] “The power of the media to create and destroy fundamental human values comes with great responsibility. Those who control such media are accountable for its consequences.” Prosecutor v. Nahimana et al., ICTR–99–52, Judgment and Sentence (3 December 2003) para 945.

^[33] Akayesu (TC) ICTR-96-4 (2 September 1998) para 551.

^[34]Prosecutor v. Nahimana et al., ICTR–99–52, Judgment and Sentence (3 December 2003) para 953.

^[35] Ibid para 949.

^[36] Ibid para 951.

^[37] Ibid para 953.

^[38] This might be a controversial statement within the broader debate in Business Human Rights circles concerning the civil functions, and public duties and responsibilities, of all companies.

^[39] Bert Swart cites seventeen international instruments which have provisions on corporate criminal liability with discretion concerning state-level sanctions, “while before 1997 none existed at all": Bert Swart, ‘International Trends Towards Establishing Some Form of Punishment for Corporations’ (2008) 6 J International Grim Just 947, 949.

^[40] Sabine Gless and Sarah Wood, ‘General Report on Prosecuting Corporations for Violations of International Criminal Law: Jurisdictional Issues’ in S Gless and S Broniszewska (eds) Prosecuting Corporations for Violations of International Criminal Law: Jurisdictional Issues (International Colloquium Section 4, Basel, 21-23 June 2017) 16.

^[41] ibid.

^[42] See a summary of Professor Murphy’s 2015 Supranational Criminal Law Lecture at the T.M.C. Asser Instituut.

The six months between 2012 and 2013 represented a turning point for the garment industry. On 24 April 2013, the Rana Plaza building collapse in Bangladesh killed more than 1100 workers. Just a year before, more than 350 garment workers died in two factory fires in Pakistan and Bangladesh. These three tragedies, among the deadliest industrial disasters in recent times, generated a previously unseen level of outrage to which followed a considerable mobilisation by civil society, business communities, States, and international organisations. Apart from the horror stemming from the loss of lives, mostly of young women, the three catastrophes were particularly shocking for Western audiences as they exposed our ignorance and even complicity. It turned out that we - the consumers – turn a blind eye to the working conditions, including health and safety, of garment workers. Thereafter, it was impossible to ignore that well-known brands we regularly purchase were connected to these production sites, which were regular suppliers of many European and American clothing companies.

A certain consensus has since then coalesced around possible means to avoid the reoccurrence of such tragedies, which has pivoted on the concept of corporate due diligence in investigating the impact of their operations and taking measures to protect human rights. Due diligence relies heavily on corporate practice in defining and implementing strategies limiting their negative impact. Initiatives at the national level such as the Dutch Agreement on Sustainable Garment and Textile can be seen as interesting attempts to constrain into a more structured frame the due diligence process. The question, as usual, is whether this is enough.

Changing supply chain and novel transnational regulatory approaches

In Twenty-First century capitalism, manufacture spans across the globe in global value chains. Corporations in Western countries are connected to myriads of suppliers and contractors responsible for different steps in the production process. In the garment industry, retailers in the Global North are connected through a network of contractual relations to independent entities across the world which, in turn, often subcontract production and assembly to other firms and producers all the way down to those responsible for the production of inputs such as cotton and other fibres. The retailer has little influence on all these entities, and its control remains often indirect at best. Global value chains make it difficult for companies to structure their relations with their suppliers in a way which limits the negative impact linked to their activities. In addition, also single States are impotent in the regulation of diffuse supply chains if they want to limit their negative impact on human rights, labour rights, and the environment. Indeed, the contribution from countries where production is located is essential, especially for the enforcement of labour and health and safety standards. Also corporations are required to step up their efforts in dealing with their partners in the supply chain.

The several regulatory efforts initiated in the aftermath of the Rana Plaza illustrate a novel multi-actor, multi-level, and less top-down approach to the regulation of transnational business conduct which aims at overcoming the jurisdictional constraints of State rules. The proliferation of global value chains and their increased impact coincided with a process that, under international law at first, switched the consensus about which actors should be responsible for regulating supply chains, and by means of which tools. This process culminated with the United Nations Guiding Principles on Business and Human Rights, that affirmed the principle of corporate responsibility to respect human rights. Corporate due diligence was chosen as a regulatory strategy to ensure the protection of human rights. Due diligence is a continuous process which requires enterprises to assess actual and potential human rights impact directly linked to their activities. Companies must design strategies to proactively minimise and correct their negative impact.  Transparency in the form of communication of corporate impact to external stakeholders is an important component of due diligence. Companies are expected to regularly report about the effects of their operations and the corrective response taken in order to build trust of all actors involved, including workers, consumers, NGOs, and even investors.

It is within the framework of these principles that the many public and private regulatory efforts that followed the Rana Plaza disaster must be understood. As initiatives in the area of garment have proliferated, a peculiar form of ‘division of labour’ began to take shape at the transnational stage. On the one hand, initiatives involving trade unions, business actors, States and international organisations such as the ILO, have addressed worker safety in Bangladesh,[1] and compensations and reparations for the families of the victims.[2] On the other hand, States aimed at improving working conditions in Bangladesh through programs focused on training and capacity-building.[3] Other initiatives took a ‘global’ approach by creating mechanisms capable of harnessing business conduct generally, and not just in a specific country. Crucial OECD work has focused on the practical implementation of due diligence procedures. Thus, the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector constitutes one of the first sector-specific implementing document of the OECD’s set of standards for responsible business conduct - the OECD Guidelines for Multinational Corporations, the first version of which dates back to 1976. 

Enter the Dutch Agreement on Sustainable Garment and Textile

The Dutch Agreement on Sustainable Garment and Textile is one of the first initiatives at the national level supporting the implementation by corporate actors of their due diligence obligations. At the same time, it attempts to ‘harden’ business obligations to perform human rights due diligence in the supply chain, and provides means to enforce an obligation which could not stem from the UNGP. The Agreement represents an interesting example of multi-stakeholder efforts in the regulation of fundamental socio-economic issues, where industry organisations, trade union, non-governmental organisations and the Dutch government agreed to join forces to ensure responsible business practices in the global garment and textile supply chain.

The Agreement expressly builds on the UN Guiding Principles and on the OECD Guidelines in order to i) making progress in 3-5 years towards the improvement the conditions of groups affected by adverse impacts in respect of specific risks in the garment and textile supply chains; ii) to provide business actors with a set of tools for preventing their operations and production from negatively impacting on their supply chain; iii) to develop joint projects to address issues that single companies could not tackle successfully. The Agreement was signed in July 2016 by 55 companies with their representative organisations - together constituting around 30% of the sectors in the Netherlands, 5 NGOs, the Dutch trade unions, and the Government. Signatories are expected to engage with business actors which did not enter into the Agreement and urge them to sign, so that the market shares of the companies involved reaches at least 50% by 2018 and 80% by 2022.

The commitments made by the enterprises

Enterprises party to the Agreement assume certain obligations, the main of which being the inclusion of nine ‘themes’ in their internal policies for responsible business conduct. Interestingly, the Agreement takes up a broad scope with respects to the supply chain risks which corporations must tackle, including not just human rights and work-related issues such as forced labour, freedom of association and living wage, but also safety and health concerns, and even gender themes, environment and pollution, and animal welfare. The detailed components of each specific theme are laid down in the Annexes to the Agreement. The obligation to address these issues is operationalised via due diligence processes which, in line with the OECD Guidance, must be communicated to all partners in the supply chain and other stakeholders, and must be performed in a manner proportionate to the size of the business and the specific circumstances of the operations.

 The commitment to conduct due diligence on the nine themes identified in the Agreement is far from being just hortative. In the first place, companies are given access to a set of tools for implementation provided for by the Secretariat. Corporate signatories are then required to annually submit an ‘action plan’ for assessment and approval by the Secretariat of the Agreement. Such an ‘action plan’ does not seem to be contemplated by the OECD Guidance, which only refers to a Corrective Action Plan with a different content. The action plan is not available to the public in light of confidential business information about suppliers and pricing policies. Nonetheless, the information required therein forces companies to gather information about their operations and to reflect upon their own practices. The plan must present the insights gained through due diligence about the structure of their supply chain. It must address how specific purchase practices of the companies, including prices, delivery times and duration of the contacts of supply, may increase risk in their supply chain. The action plan also requires companies to substantiate their policies with regards to the nine themes, and formulate measurable targets for improvement.

The Agreement explicitly stresses the ‘business case’ for an early-mover engagement in responsible production. Indeed, it allows signatories companies to anticipate the growing trend of mandatory due diligence, which is particularly noticeable in the EU. After the Directive on non-financial reporting and the Regulation on conflict minerals, the European Parliament has recently tabled a Motion to require the Commission to propose mandatory regulation for the garment supply chain. Different from mandatory due diligence as laid down, for example, in the conflict minerals Regulation, the Agreement does not contemplate third party auditing of due diligence, the outcome of which must normally be made public by companies. In any event, signatory corporations to the Agreement can publicise their participation, can rely on the support of other parties in its implementation, and have access to a growing corpus of best practices that the signatories are going to share within the framework of the Covenant. Companies can also rest assured that, in case information arises concerning an enterprise’s adverse effects in the supply chain, other parties (presumably NGOs) will not make the information public before the elapsing of a two-week period during which the involved company must produce a ‘satisfactory result’.

Institutional features, mechanisms for review and dispute settlement

Certain institutional features constitute the most innovative and interesting elements of the Agreement, which sets up permanent institutions responsible for monitoring companies’ action plans and for settling disputes. The Steering Group and its Secretariat are instrumental in overseeing compliance with the Agreement, in pushing companies towards respecting the commitments in their action plans, and in ensuring that continuous improvement takes place. The Steering Group, which acts by consensus and whose composition reflects the multi-stakeholder character of the Agreement, is responsible for its day-to-day management and possible projects for its implementation. The Steering Group is supported by a Secretariat.

The Secretariat serves as a central source of expertise, training and support for enterprises in the area of due diligence. Its most important task is, however, the assessment of companies’ action plans elaborated within the frame of their due diligence obligation. The assessment is performed against the text of the Agreement itself, the OECD Guidance, and the context of operation of the enterprise under review. Specific elements of due diligence are under scrutiny as well, such as the way the company communicates its principles and policies for ‘international responsible business conduct’, and how these policies are implemented in its daily operations. The review shall also appraise the way the company has analysed risk of adverse impact, whether it has collected sufficient information about its supply chain, whether it has prioritised its activities, and investigated the correlation between its own practice and adverse impact.

The review of the action plan evaluates the undertakings for improvement both with respect to the reduction of its adverse impact, the monitoring of its suppliers and the insights acquired over its operations, and theme-specific suggestions made by the parties to the Agreement. Further, the Secretariat compares the companies’ objectives with respect to each of the nine themes. Companies with less ambitious goals and which may be expected to do more, given their size and context of operations, will be ‘asked’ to scale up their efforts. Under this scenario, the enterprise is given the opportunity to present a revised action plan after two months. The Secretariat is also empowered to randomly verify that the information supplied is accurate. Finally, the Secretariat prepares aggregated annual public reports of the results achieved and of the improvements in the supply chain.

The review of action plans is given a prominent place in the Agreement, although it seems to lack real enforcement tools. A dispute settlement mechanism is created to solve disagreements (that the Agreement defines as ‘disputes’) between the company and the Secretariat about its assessment. Such disputes are limited to the review of the action plans, and not the appraisal of other elements of individual due diligence. An independent Complaints and Dispute Committee will be appointed by the Parties, with the competence to assess whether, with specific respect to action plans, a signatory enterprise is acting in accordance to the Agreement. The ruling of the Committee is binding both on the enterprise in question and on the Secretariat, which is entrusted with monitoring compliance. In case a company fails to comply with the ruling of the Committee after the timeframe it has specified, all information the Secretariat possesses on the company in question, including the dispute proceedings, is released to the Steering Committee members, excluding the business ones. The Agreement does not clarify whether the reports can be made public. At this stage, the Steering Committee can then only ‘issue written reminders’ to urge compliance. In the presence of further disagreement over compliance with a decision of the Complaints and Dispute Committees, one or more parties to the Agreement can submit the question to arbitration by the Netherlands Arbitration Institute (NAI). The standard of review of the NAI is expressly limited to ‘review marginally’ whether or not the company is in compliance with the binding advice of Committee. As it can be seen, no sanctions stem from failing to comply with the Committee’s advice. This questions whether the Agreement actually provides with real tools to scale up ‘sloppy’ commitments, or even just to enforce current ones, apart from offering a platform for discussion and peer pressure.

A second mechanism is contemplated for ‘complaints’, which can be raised by any stakeholder suffering injury, loss, or damage caused by a company party to the Agreement. As a non-negligible limitation, the subject matter of the complaint must be ‘of material significance’ to the complaining party, and must be substantiated in relation to the responding business party. This mechanism however is only ‘residual’. To the extent it may overlap with the jurisdiction of another dispute settlement mechanism (arguably the National Contact Point for the OECD Guidelines), the Agreement gives precedence to the latter one. It can therefore be expected that the complaints mechanism under the Agreement will deal with, for example, complaints linked to themes which are outside the scope of the OECD instruments. While the subject of the complaint and the parties involved are made public, the rest of the proceeding is not accessible, and the parties must withhold any information. Also the public nature of the binding ruling can be questioned, as parties can require confidentiality for competition and privacy concerns. The Committee will rule on whether the company is acting in accordance with the Agreement. In case further failure to comply with a ruling of the Committee is due to a supplier which cannot be induced to cooperate, such supplier is black-listed and parties to the Agreement are no longer allowed to purchase from it. In case of ‘unjustifiable’ failure to comply, parties can release information to the public about the dispute as well as express their opinion on the failure to comply. As a measure of last resort, parties can also request to the Steering Committee that the enterprise in question is expelled from the Agreement.

The challenges lying ahead

The Agreement is a much needed step to ensure more responsible practices in the Dutch garment sector, and to foster corporate due diligence. Its most important contribution appears to be the establishment of a system to enforce voluntary commitments. However, its multi-stakeholder nature has required certain compromises limiting the extent of review of due diligence practice and the amount of insight the public can acquire about a specific company and its supply chain. Although companies are required to perform due diligence, it is unclear whether, and if so to what extent, the way the due diligence process is operationalised in practice is checked. This should be compared with the approach followed by recent EU legislation contemplating auditing of the processes implemented by enterprises, and thereafter the release of the findings. Granted, the power of peer pressure should not be underestimated as a check on companies’ action plans. The establishment of a permanent structure capable of exercising pressure on corporate entities to force them to respect their commitments, and eventually to scale them up, appears a sensible approach to engage companies in behaviour that, as of now, goes beyond legal provisions which would otherwise be applicable.

Within this frame, it is regrettable that action plans are not made available in a disaggregated form, so as to allow the public to evaluate the commitments entered into by specific corporations. If one of the purposes of the Agreement is to establish a framework for accountability with respect to their own commitments, then more transparency would have certainly be welcomed. Wouldn't it be sufficient to remove sensitive information from action plan? Generally, transparency can also allow the public to form a better understanding of the garment supply chain in which Dutch companies operate. Admittedly, the situation could improve, as companies are to decide - within 1 year from the entry into force - which information to disclose and - within 3 years - how to communicate individually to the public. Developments are still possible as companies are expected to begin implementation of their actions plans in July 2017. Future practice of the Secretariat, the Steering Committee, and especially of the signatory companies will be key to determine the impact of the initiative.

[1] Alliance for Bangladesh Worker Safety, supported by US businesses; Accord on Fire and Building Safety in Bangladesh, which features a tripartite structure.

[2] Rana Plaza Arrangement.

[3] Sustainability Compact for Bangladesh.