From "Mapping International Labor Disputes: An Overview" Bob Hepple, Q.C.

From "Mapping International Labor Disputes: An Overview" Bob Hepple, Q.C. The International Bureau of the Permanet Court of Arbitration (eds.), Labor Law Beyond Borders: ADR and the Internationalization of Labor Dispute Settlement, 35-50 (2003) II. THE CHANGING SOURCES OF TRANSNATIONAL REGULATION6 A. Approaches In response to the above developments, two distinct approaches have emerged. The first is that of applying trade and investment sanctions against socalled "social dumping" in order to deter a "race to the bottom" with respect to labor standards. The second approach seeks to encourage the development of processes within global production and distribution chains that favor "best practices" or the raising of labor standards, the so-called "race to the top." This is not the place to discuss the relative merits of these two approaches.7 But, from the viewpoint of dispute settlement, the adoption of a sanctions-based framework of anti-social dumping clauses in trade and investment agreements may involve philosophies and mechanisms different from one which aims to encourage and develop the potential of TNCs to provide "decent work" (in the terminology of the International Labour Organization ("ILO")) for economically and socially disadvantaged groups of workers, and also for producers in the informal sector. The first approach is to be found in "social clauses" in multilateral and bilateral trade and investment agreements. Since the 1947 Havana Charter for the proposed International Trade Organization,8 there have been many attempts to link trade and unfair labor conditions. Multilateral commodity agreements, such as those for sugar, tin, cocoa and rubber, permitted anti-dumping or countervailing duties in order to achieve harmonization of labor conditions between exporter and importer nations.9 Specific legislation in various countries has restricted imports of goods produced by prison-, forced or child labor, or in conditions endangering the health of workers in the country of 6. 7. 9. This Part draws on Bob Hepple, A Race to the Top? International Investment Guidelines and Corporate Codes of Conduct, 20 COMP. LAB. L. & POL. J. pp. 347^363 (1999). See Bob Hepple, Labor Regulation in Internationalised Markets, in REGULATING INTERNATIONAL BUSINESS: BEYOND LIBERALISATION pp. 183-202 (Sol Picciotto & Ruth Mayneeds., 1999). Havana Charter for an International Trade Organization, UN Conference on Trade and Employment, Final Act and Related Documents, U.N. Doc. E/CONF.2/78, U.N. Sales No. 1948 11.D.4. See Steve Charnovitz, The Influence of International Trading Standards in the World Trading System: an Historical Review, 126 INT'L LAB. REV. pp. 565-584 (1987). The PCA/Peace Palace Papers 37

origin. The U.S. Omnibus Trade and Competitiveness Act (1988)10 classifies the denial of certain worker rights as "'unreasonable" trade practices against which quantitative restrictions may be imposed. Preferential (as distinct from most-favored nation) trade policies have also been used - for example, the Generalized System of Preferences ("GSP") used in the United States, which requires countries to be taking steps to achieve certain standards if they are to benefit from preferences, and the GSP used in the EU, allowing additional preferences to countries that can demonstrate compliance with the ELO' s "core" human rights conventions. The second approach relies on the use of "soft law" to achieve the observance of fundamental rights and encourage "best practices." In this respect, we are currently witnessing a retreat from public international labor law, above all as embodied in the conventions and recommendations of the ILO, to privatized "soft" regulation through corporate codes of conduct. B. Development of International Labor Law One may identify three periods in the post-1945 development of international labor law. The first period, from the Declaration of Philadelphia in 1944" to the 1960s, was dominated by the ILO's ambitious program of conventions and recommendations that emphasized the centrality of collective labor law - especially freedom of association (Convention No. 87),12 collective bargaining (Convention No. 98),u the principle of equality (Convention No. 100),'4 andnon-discrimination (Convention No. 111).15 These instruments-the outcome of a remarkable tripartite consensus between governments, employers and unions at international level - were addressed to member states of the ILO as the principal actors in the public international law regime. Although many 10. Pub. L. No. 100-418, 102 STAT. 1107. 11. Declaration concerning the Aims and Purpose of the International Labour Organization, adopted at the 26* Session of the ILO, Philadelphia, May 10,1944, Constitution of the 12. 13. ILO, Ann. Convention concerning Freedom of Association and Protection of the Right to Organise (No. 87), June 17, 1948, entry into force July 4, 1950. Convention concerning Right to Organize and Collective Bargaining (No. 98), June 8, 1949, entry into force July 18, 1951. 14. Convention concerning Equal Remuneration for Men and Women Workers for Work of Equal Value (No. 100), June 6, 1951, entry into force May 23, 1953. 15. Convention concerning Discrimination in Respect of Employment and Occupation (No. Ill), June 4, 1958, entry into force June 15, 1960. 38 The PCA/Peace Palace Papers of the texts concern action to be taken by private entities, they only bind states members, who are obliged to ensure that private action be taken by the employers and workers concerned. The second period, from the late 1960s to the early 1980s, was one in which the focus shifted from governments to TNCs. Organized labor in the developed world and governments in newly independent nations were becoming increasingly alarmed by the activities of the TNCs - the scandal involving the International Telephone and Telegraph ("ITT") in Chile and the campaign for sanctions against apartheid in South Africa being defining moments. This led to public codes directed at TNCs, such as the OECD Guidelines for Multinational Enterprises (1976, revised in 2000),16 the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (1977)," codes at regional level such as in the European Community,18 and codes promulgated by national governments, such as the Canadian code for companies with subsidiaries operating in South Africa during the apartheid era (1978).19 There were also many private initiatives, notably the U.S. Sullivan Principles to promote racial equality practices in American TNCs operating in South Africa (1977), the MacBride Principles relating to fair employment practices in Northern Ireland (1984), the Guidance Document for Social Accountability promoted by the U.S. Council on Economic Priorities Accreditation Agency ("SA 8000"), and in the United Kingdom, the Ethical Trading Initiative ("ETI"), which is an alliance of companies, NGOs and trade unions working to promote good employment practices through a "Base Code" to which ETI members are expected to conform. A third period began in the late 1980s, at a time when national governments were deregulating employment in the interests of labor market "flexibility." There was a phenomenal upsurge in the adoption and use of private corporate codes. These codes were a response to pressure from consumers, investors, trade unions and NGOs. They also reflected the view of many managers that the benefits of good employment (and environmental) practices - such as 16. Available at http://www.oecd.org/daf/investment/guidelines (visited March 2003). 17. Declaration adopted by the Governing Body of the International Labour Organization at its 204* Session (Geneva, Nov. 1977), available at http://www.ilo.org/public/ english/standards/norm/sources/mne.htm (visited March 2003). 18. See infra Part Il.C.b. 19. Code of Conduct concerning the Employment Practices of Canadian Companies Operating in South Africa, 1978. The PCA/Peace Palace Papers 39

improved employee morale and greater productivity - outweigh the costs such as those of monitoring and preventive action. These corporate codes have several important features that distinguish them from international labor standards. First, most of them are issued unilaterally by individual companies or by employers' organizations; only a few involve the participation of NGOs and trade unions. Secondly, they are purely voluntary written commitments to observe standards in the conduct of business, including fair employment and labor rights. Thirdly, the standards which they seek to uphold are generally less extensive than ILO standards. Recent surveys indicate that only between twenty and thirty-three percent of the codes expressly refer to international standards. Finally, the provisions for monitoring (i.e., checking that the code is being followed) are weak or non-existent. Third-party assessment, in which an independent external audit body certifies that the corporation is meeting the stated standards, is rare. Generally, there are no sanctions for non-compliance. None of the codes recently surveyed provides for state involvement in the enforcement process. We are currently entering a fourth period of post-war history in which attempts are being made to reassert an element of public control over these private codes. The most important political development was the adoption in July 1998 of the ILO's Declaration on Fundamental Principles and Rights at Work,20 based on eight core human rights conventions of the ILO (covering freedom of association and the right to collective bargaining, nondiscrimination, child labor and forced labor). Significantly, the Declaration is voluntary in nature and utilizes a promotional follow-up procedure without sanctions. In particular, in order to meet the concerns of developing countries, Article 5 of the Declaration breaks the link between trade and observance of core standards by providing that: "... labor standards should not be used for protectionist purposes, and that nothing in this Declaration and its follow-up shall be invoked or otherwise used for such purposes; in addition the comparative advantage of any country should in no way be called into question by the Declaration and its follow-up." At the PC A Seminar giving rise to this volume, Professor Javillier, in his usual perceptive and highly knowledgeable way, presented an analysis of the 20. Adopted by the International Labour Conference, 86th Session, Geneva, June 1998. ILO's enforcement mechanisms. Allow me to point out, however, that the ILO's campaign of encouraging those states which have not already done so to ratify the eight fundamental human rights conventions had brought the total number of ratifications among the ILO's 175 member states to 1,152 out of a possible 1,400 by April 2002. This represents a twenty-six percent increase since 1997. Seventy states have ratified all eight conventions; forty-five have ratified seven; twenty-two have ratified six; only thirty-eight have ratified five or fewer. But it should be noted that less than half the countries have ratified both the ILO Convention on Freedom of Association (No. 87)2' and the Convention on Collective Bargaining (No. 98).22 The ILO has also designated four "priority" conventions on labor inspection,23 consultations on employment policy,24 and promotion of the enforcement of international labor standards.25 By April 2002, only twenty-three states (most of the EU member states and Australia) had ratified all four; forty (including the United Kingdom) had ratified three; fifty-three had ratified two; and fifty-nine had ratified only one. This indicates that, in the foreseeable future, the focus of dispute resolution arising from ILO standards seems likely to be in respect of the eight core conventions and, to a lesser extent, of the four priority conventions. More generally, one has to note the general failure of developing countries to ratify and implement other ILO conventions and recommendations (7,017 ratifications out of a possible 27,000 by April 2002, an increase of eighteen percent over the past decade). This raises issues that are beyond the scope of this paper, but it suggests that opportunities for dispute resolution under the "non-core" and "non-priority" ILO conventions will remain relatively limited. 21..Supra note 12. 22. Supra note 13. 23. Convention concerning Labor Inspection in Agriculture (No. 129), June 25,1969, entry into force Jan. 19, 1972. 24. Convention concerning Employment Policy (No. 122), July 9, 1964, entry into force July 15,1966; Convention concerning Private Employment Agencies (No. 181), June 19, 1997, entry into force May 10, 2000. 25. Convention concerning Tripartite Consultations to Promote the Implementation of International Labor Standards (No. 144), June 21,1976, entry into force May 16,1978.

C. Regulation at Regional Level 1. North American Agreement on Labor Cooperation Mention must be made of regulation at regional level, some of it highly innovative. One form of regional trans-national regulation aims to ensure the effective enforcement of domestic labor laws. The North American Agreement on Labor Cooperation ("NAALC"),26 a side accord to the North American Free Trade Agreement ("NAFTA"),27 came into operation in September 1993. This agreement relies on cross-border monitoring in order to ensure that Canada, Mexico and the United States observe their own domestic labor laws. The NAALC commits each state party to promote eleven basic principles in accordance with their own laws, customs and history. The agreement is administered by the Commission for Labor Cooperation and it contains a dispute resolution process. If a dispute relating to the enforcement of labor laws cannot be resolved, nothing further can be done under the NAALC unless it relates to health and safety, child labor or minimum wages. In respect of those three issues, if the matter is not resolved by ministerial consultations, an independent Evaluation Committee of Experts ("ECE") and further consultations, two out of the three countries can demand an independent arbitral panel if they believe there is still a "persistent pattern of failure" by the third country to effectively enforce national labor laws on one, two or three prescribed matters. The matter must be trade-related and covered by mutually recognized labor laws. Panel recommendations take the form of an "action plan." Ultimately, the arbitral panel can impose a fine, or trade sanctions (in the case of Canada, trade sanctions cannot be imposed; instead, Canada guarantees payment of the fine by making the arbitral panel's award a judicial order under Canadian law, enforceable by summary proceedings in the courts.28) 26. North American Agreement on Labor Cooperation between the Governments of Canada, the United Mexican States and the United States of America, 321.L.M. p. 1499 (1993). 27. North American Free Trade Agreement, Washington, Dec. 17, 1992, entry into force Jan. 1, 1994, U.S.-Can.-Mex., 32 I.L.M. p. 605 (1993). 28 Lance Compa, The North American Free Trade Agreement and the North American Agreement on Labor Co-operation, in INTERNATIONAL ENCYCLOPEDIA OF COMPARA TIVE LABOR LAW AND INDUSTRIAL RELATIONS paras. 87-100 (Roger Blanpain ed. 2001). See further J. Christopher Thomas, The Advantages and Disadvantages and the Potential Usefulness of Alternative Dispute Resolution of Interstate Labor Disputes, in this volume at pp. 109-114, Part 1II.C & D. 2. European Community While the NAALC is primarily concerned with the enforcement of domestic labor laws, the European Union has developed a unique system of transnational labor regulation. In December 2000, political agreement was reached on an over-arching framework in the form of the comprehensive EU Charter of Fundamental Rights.29 But it needs to be emphasized that the European Community's ("EC") Social Chapter30 and Employment Chapter31 fall far short of being a comprehensive code of labor rights. Indeed, Article 137(6) of the EC Treaty expressly excludes from the procedures for enacting EC law any measures on pay, the right of association, and the right to strike or impose lockouts. These matters remain within the exclusive legislative competence of member states. The main enforcement mechanisms for breach of EC employment and labor law are the national courts and tribunals, which are obliged to apply directly effective EC obligations and, in some cases, to award compensation against the state for failing to comply with its EC obligations. The member states undertake to respect the competence of the European Court of Justice ("ECJ") in disputes concerning the interpretation and application of the EC Treaty. Employment and discrimination disputes form only a relatively small part of the case-load of the ECJ (twenty out of 276 cases in 1999 concerned "social measures," four were on free movement, and nine on social security for migrant workers). Although there have been some judges on the Court with specialist experience of employment disputes,32 the ECJ not infrequently finds itself having to deal with references from specialist national labor courts and tribunals. In recent years, its work in this field has been criticized not only for lack of expertise but also because the procedure for preliminary references33 does not allow the ECJ access to the statistical and social science materials which are essential to the proper assessment of issues such as indirect discrimination and objective justification. Nor are class actions available, whichnurtured disparate impact law in the United States. This points to the need for developing forms of dispute resolution other than the ECJ. 29. Charter of Fundamental Rights of the European Union, 2000 O.J. (C 364) p. 8. 30. Treaty Establishing the European Community, Amsterdam, Nov. 10, 1997, Title XI, 1997 OJ. (C 340) p. 3 [hereinafter EC Treaty]. 31. Id. Title VIII. 32. E.g., Judges Mancini, Slynn and Colneric. 33. EC Treaty, supra note 30, art. 234. 42 Tho J>n/L /!> D l _

An interesting example of the new directions of the EC in respect of dispute resolution is to be found in the European Works Councils Directive.34 This contains a mandatory obligation on the parties to negotiate "in a spirit of cooperation with a view to reaching an agreement on the detailed arrangements for implementing the information and consultation with employees" in Community-scale undertakings above a certain size. The negotiations take place between central management and a special negotiating body ("SNB") composed of representatives of the employees. The outcome should be a special kind of collective labor agreement - a "contract institution" or framework for future information and consultation which assumes its own life once created. Failure to agree within a specified time leads to the imposition of the "subsidiary requirements" - or mandatory core of information and consultation rights - by legislation of the member state in which the central management is situated. Justice38 had competence (under Article 37 of the ILO Constitution) to resolve any question or dispute relating to the interpretation of the ILO Constitution or of international labor conventions. This procedure has only been resorted to on a very few occasions (all between 1922 and 1932). It has been suggested (by the ILO Director-General in 1984) that more recourse should be had to this procedure in critical situations, but this has not occurred. Since 1946, there has also been provision for appointing a tribunal for the expeditious determination of any dispute relating to the interpretation of a convention, but this has yet to be utilized. More important are opinions given to governments by the Director- General or the ILO Legal Adviser, which obviously carry great weight.39 No account of dispute resolution in respect of labor rights in Europe would be complete without mention of the European Court of Human Rights in Strasbourg, established by the Council of Europe under the European Convention on Human Rights and Fundamental Freedoms ("ECHR").35 The decisions of this Court and of national courts and tribunals under the ECHR are increasingly influencing the development of employment and labor law. The Council of Europe's European Social Charter (as revised in 1996),36 a "large footnote" to the ECHR, is enforced by a supervisory system modeled on that of the ILO, but it contains no provision for adjudication or arbitration of complaints. D. Summary There is thus a multiplicity of standard-setting and dispute resolution bodies, and there is much confusion and inconsistency between the standards set by the ILO, the Council of Europe and the EU.37 There is no over-arching international court or tribunal to resolve conflicts of interpretation and application. In the case of the ILO, the Permanent Court of International 34. Council Directive 94/95, 1994 O.J. (L 254) p. 64. 35. European Convention on the Protection of Human Rights and Fundamental Freedoms, entry into force Sept. 3, 1953, 213 U.N.T.S. p. 222. 36. European Social Charter, entry into force Feb. 26, 1965, 529 U.N.T.S. p. 89. 37. Infra Part III./1. The PCA/Peace Palace Papers 38. Now replaced by the International Court of Justice. 39. Nicolas Valticos & Geraldo von Potobsky, International Labor Law, in INTERNATIONAL ENCYCLOPEDIA OF COMPARATIVE LABOR LAW AND INDUSTRIAL RELATIONS, paras. 124-127 (Roger Blanpain ed., 1994). The PCA/Peace Palace Papers 45