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Monthly Archives: March 2012

The current right-wing government in the Netherlands is not particularly unfriendly to business. Yet it continues many of the former (center-left) policies with regard to corporate social responsibility. It recently proposed a new law to enforce labour-related notification obligations for companies who receive government subsidies.

Since two years companies who receive subsidies, credits, credit insurance or participate in government-sponsored trade missions are obliged to explicitly endorse the OECD-guidelines and have a ‘duty of care’ with regard to child labour and forced labour. This duty extends to the companies own activities abroad, and the activities of the ‘first essential supplier’. Failure to conform may result in the withdrawal of government support. The newly proposed law adds an obligation to notify the government in case of ‘facts and circumstances that indicate child or forced labour’, and the possibility of administrative sanctions in case of non-compliance. The maximum penalty is set at € 74.000,-

The law is yet to be discussed in parliament, but the legislative memorandum highlights some interesting issues

Relevance of ILO Standards

The Dutch proposal is in line with the Atlantic division on whether  the included labour standards align with ILO standards (the European approach) or the use of idiosyncratic definition (as applied in the American Generalized System of Preferences, Free Trade Agreements etc.) The norms and definitions in ILO Conventions 28, 105, 138 and 182 form the basis to determine whether child or forced labour has indeed occurred. But some countries have not ratified these instruments. The definition of what constitutes ‘heavy labour’, which is important to determine the applicable age limits, may differ from one jurisdiction to the other. For countries who have ratified and have reported their age requirements to the ILO, these domestic standards will be applied. For non-ratifying countries, the highest standard of protection is assumed.

Competitiveness

The Council of State, which advises the government on all legislative proposals, mentions in passing the potential adverse economic effects on Dutch companies. As Dutch companies operating abroad are deprived of the possibility to go for the cheapest option, if the cheapness is caused by child or forced labour, other corporations from other countries may gain from this. The government stated in response that not doing anything about child and forced labour may result in reputational damages that are much more costly, and that pro-active policies may actually lead to a competitive advantage as customers will value it.

The supply chain

It may be unclear who the ‘first essential supplier’ is. This may not be clear at the outset, it may change over time, or the company may put of a smoke screen by means of a straw man. The company is therefore obliged to report in its subsidy application who the first essential supplier is, or at the earliest possible moment in case of uncertainty or change. A violation of this provision may result in forgery and can thus be remedied by criminal sanctions. In addition, supply chains are longer than the first supplier. Child labour or forced labour practices beyond the first supplier are not regulated because it is deemed impossible for the company at the end of the supply chain to trace labour rights violations throughout the chain.

International human rights instruments, and especially the European Convention on Human Rights (ECHR), are under fire. The critiques relate mainly to the broad interpretation that the judges of the European Court of Human Rights (ECtHR) allegedly give to the terms of the Convention. This supranational judiciary thus limits the powers of national legislators. As the latter are democratically elected, ‘Strasbourg’ interferes with legitimate domestic policies, so the argument goes. The fault lines in the human rights debate seem clear. Liberals and conservatives are concerned with the interpretation of the right to property in the sphere of social security, and various cultural issues such as religious education and freedom of speech. Left-wing parties tend to defend the ECtHR, and argue that human rights should not depend on political majorities. Indeed, these rights are meant to protect individuals and minorities within democratic systems.

This debate is interesting, but rather shallow and one-sided. Two issues go unnoticed. First the scope of interpretation by the ECtHR. It is true that the court has interpreted the ECHR expansively from time to time. But this is not limited to issues that liberals and conservatives like to focus on.

Also corporations enjoy ‘human’ rights under the ECHR-system, which is not clear from the text as such (see Article 34). The right to property in Article 1 of the first protocol has not only been interpreted in a leftish, but also in a rightish fashion, by imposing stricter limitations on (indirect) expropriation of corporate assets than had been envisaged at the time when the ECHR was drafted. The limits of other rights have not been comprehensively tested. But in the United States, credit rating agencies are generally successful in invoking the right to free speech to justify flawed credit ratings. Standard & Poor’s has argued in submissions to the European Commission that they expect to enjoy the same protection under the ECHR (to which the EU will accede). When Mitt Romney got a suggestion at a rally to increase taxes on corporations, he replied: “Corporations are people too, my friend.” When it comes to peoples’ rights, he seems to be right. But this does not seem to cause as much controversy as social security issues.

The second feature of this debate that I find remarkable is the apparent power-paradox of the human rights system. Liberals and conservatives criticize human rights conventions for their infringement on domestic legal orders. But the same conventions are also regarded ineffective documents without adequate enforcement mechanisms. Admittedly, the ECrHR is in some respects an exception to the various UN Committees, who’s communications are not even legally binding. But it sharply contrasts with the enforcement mechanisms in trade- and investment law. The reports by the World Trade Organization’s Dispute Settlement Mechanism and investment tribunal’s awards may have profoundly more impact on countries than an ECtHR judgement. So why do the human rights critics not (also) focus on these forms of “intrusive” international law?

The traditional socialist and labour parties across Europe are in crisis. The financial meltdown that was allegedly caused by excessive deregulation of banks and other financial institutions is now solved by the same conservative and liberal parties that implemented these policies some decades ago. Neoliberalism is alive and kicking. Not only have labour parties failed to win elections, but they seem equally ineffective in their opposition role. The Dutch Labour Party (Partij van de Arbeid) is no exception. Party leader Job Cohen resigned last month after continuous bad polling and internal debates about whether the party should position itself in the political center, or closer to the socialist party (which currently outpolls the labour party by 2-1). The same week, Paul Kalma, a former director of the Wiardi Beckman Stichting (the Dutch Labour Party think tank) and Member of Parliament, published his new book. Kalma writes in the spirit of the late Tony Judt, who argued in his 2010 treatise ‘Ill Fares the Land‘ that labour parties have lost their voice: “For the last thirty years, when asking ourself whether we support a policy, a proposal or an initiative, we have restricted ourselves to issues of profit and loss – economic questions in the narrowest sense.” Kalma puts forward strong arguments to rehabilitate and reinforce the Rhineland model of Western European capitalism. He opposes stock-market listings for banks, and argues for new forms of co-determination. All in all, his new narrative for the labour party is predominantly economic in nature. Kalma’s book is part of a broader process of ideological reflection by Europe’s labour parties. The British Policy Network and the Dutch Wiardi Beckman Stichting play a leading role herein, with their ‘Amsterdam Process’. The task of formulating a new narrative is obviously difficult. But it will be most interesting to see whether the electorate’s increased receptiveness to cultural issues (such as immigration policies) will eventually trump a thorough reorientation on social-economic matters, for which the books by Judt (on a conceptual level) and Kalma (for the Dutch context) provide valuable food for thought.


(http://dougsaunders.net/; blog post November 20, 2011 )

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