Modern Slavery: Do the 2014 EU Procurement Directives Establish New Routes to Remedy for Victims?

June 19, 2018 •

Eamonn

By Eamonn Conlon
Partner, A&L Goodbody, Dublin


In this post, Eamonn Conlon considers whether the 2014 EU Procurement Directives provide a basis for liability of public buyers or their suppliers for severe labour rights abuses experienced by workers, including modern slavery, using a construction case study. While the post examines Irish implementing legislation in particular, much of the analysis is of broader application across EU member states.


1. Introduction

According to the UN Guiding Principles on Business and Human Rights (UNGPs) governments should promote respect for human rights by those with whom they do business. They should also take steps to ensure that their domestic judicial mechanisms are effective as a route for victims of business-related human rights abuses to access a legal remedy. As this post explores, these norms raise interesting questions for EU procurement law.

The EU’s 2014 directives governing general public sector, utilities, and concessions procurement include two ‘principles of procurement’ (art 18  public sector procurement Directive, art 36 utilities Directive and arts 3 and 30 concessions Directive). The first principle requires contracting authorities to treat ‘economic operators’ equally and without discrimination and to act transparently and proportionally. Economic operators are suppliers of goods, services and works on the market.

The second principle requires member states to take appropriate steps to ensure that, in performing public contracts, economic operators comply with applicable obligations in the field of environmental, social, and labour law including the ILO core conventions. The ILO’s eight ‘core’ conventions prohibit forced labour, child labour, and workplace discrimination, and provide for freedom of association, the right to organise, and collective bargaining. All EU member states have ratified them.

EU Directives are addressed to member states, who must give them effect in their domestic law.  Member states have responded in different ways to the new requirement to ensure compliance with ILO conventions by their suppliers. As reported on this blog by Théo Jaekel, the Swedish parliament rejected a government proposal to make core labour standards binding on public contractors. Norway (in the European Economic Area) requires public authorities to ‘have appropriate measures/procedures/routines to promote respect for fundamental rights through public procurement when there is a risk of violation of such rights.’[i] The UK, apart from Scotland, decided to avoid ‘gold plating’ its regulations and left adherence to the new principle of compliance with ILO core conventions as a matter for administrative measures.

Enacted to implement the 2014 public procurement Directive, Ireland’s 2016 public procurement regulations require economic operators to comply with applicable obligations under ILO core conventions in performing public contracts. Contracting authorities must, by their contracts, require such compliance. Ireland has matching terms for procurement of concessions and by publicly-owned utilities.

In the rest of this post I look at whether Ireland’s new regulations under the 2014 Directives provide a remedy—by establishing potential liability—for infringement of core labour rights in public supply chains, in line with the UNGPs. But first I consider whether the Directives themselves provide or require such a remedy in all EU member states.

2. Does EU procurement law provide (or require) a remedy for infringements of ILO core labour rights?

EU procurement law’s main purpose is to facilitate a single market in public procurement. But as Sue Arrowsmith and Christopher McCrudden point out, purchasing policy has long been used for social objectives. Furthermore, as Claire Methven O’Brien, Olga Martin-Ortega and the Learning Lab’s work show, responsible business and sustainable development policies and practice are increasingly highlighting the relationship between procurement and human rights.

EU law protects bidders claiming to be harmed by contracting authorities’ failure to comply with the Directives. There are remedies Directives for public and utilities procurement which require specific remedies to be available to such bidders, including damages, as does the 2014 concessions Directive.

Yet EU procurement law gives no specific remedies to supply chain workers, unlike economic operators. Remedies available to the latter are said to be an instance of the general principle ‘inherent in the law of the union’ of state liability for damages for breach of EU law. Member states must provide for judicial protection of rights under EU law. It is for each member state to lay down the detailed procedural rules for this protection. Those rules must be no less favourable than those governing similar domestic actions. And they must not make it impossible in practice or too difficult to exercise EU law rights. These are the principles of equivalence and effectiveness.

To recall, EU directives can have domestic effect in four ways: First, as already noted, by domestic law transposing them. Second, domestic law must be interpreted as far as possible, to give effect to EU law. Through interpretation, domestic civil remedies are manipulated to conform to the requirement to provide effective and equivalent remedies for infringement of EU law rights. This has happened in such areas as unfair terms in consumer contracts, equal pay, maternity protection, discrimination, and company law.

Third, if a directive is unconditional and sufficiently precise, it can be enforced against member states in their own courts, without being transposed. Fourth, member states can be liable for harm caused by their failure to transpose EU directives properly.

The third and fourth channels just mentioned are ‘vertical’ only. In other words, they give individuals remedies against member states, and emanations of member states, but not against other individuals or private corporations. Contracting authorities under the procurement directives (in other words, public buyers) are undoubtedly emanations of a member state.

The new mandate arising under the 2014 procurement Directives to take appropriate steps to ensure compliance with ILO core conventions seems to be ‘unconditional and sufficiently precise’ to give a remedy against contracting authorities who fail to take the required steps, even in states where the mandate has not been fully transposed into domestic law.

3. Modern slavery: A hypothetical claim brought in Ireland by supply chain workers

Construction is a high risk area in Ireland and throughout the European Union for exploitation of workers through modern slavery and human trafficking. ‘Our sector is rife with human rights abuses,’ acknowledged the Chartered Institute of Building chief executive in 2015. The International Labour Organisation (ILO) estimates profits of US$34 billion a year being made from forced labour in construction, manufacturing, mining, and utilities.

Ireland’s National Plan on Business and Human Rights (NAP) states that the country’s Office of Government Procurement ‘is committed to ensuring that human rights matters are reflected in public procurement and embodied in national public procurement policy.’

Below I look at some issues that might arise in civil proceedings in Ireland brought by Samita, an 11-year old girl working under conditions amounting to forced labour in an Indian quarry, where stone is extracted and cut to make attractive paving for a construction project, as illustrated here.

Reg 18(4) of Ireland’s regulations transposing the public sector procurement directive provides:

  1. In the performance of a public contract, an economic operator shall comply with applicable obligations in the fields of environmental, social and labour law that apply at the place where the works are carried out or the services provided that have been established by European Union law, national law, collective agreements or by international, environmental, social and labour law listed in Schedule 7 [which lists the ILO core conventions and three conventions on transboundary environmental matters and their protocols]
  2. A contracting authority shall ensure that public contracts entered into by it require that the obligations referred to in subparagraph (a) are complied with.

In our hypothetical case, Samita is suing a contracting authority, its landscape architect who specified the stone, and the main contractor, landscape subcontractor and stone importer, all based in Ireland.

3.1 Liability of economic operators

To assess economic operator’s liability, we need to unpack reg 18(4)(a).

‘In the performance of a public contract…’

The landscape architect specified the stone material in the performance of its public contract with the contracting authority (or perhaps performance of a subcontract with an architect and, in turn, of the architect’s public contract with the contracting authority). The main contractor placed a subcontract with a landscaping subcontractor, took delivery of the stone paving material and supervised its fixing at the site, all in the performance of its public contract. The landscaping subcontractor’s work, and the stone supplier’s ordering and delivering the stone, are also part of the main contractor’s performance of its public contract with the contracting authority.

‘… an economic operator shall comply with applicable obligations…’

The ILO Minimum Age Convention and Worst Forms of Child Labour Convention prohibit hazardous work by 11-year old children. Child labour, debt bondage, and unsafe working conditions in South Indian granite quarries are reported here and here (although reducing) and in Rajasthani sandstone quarries here, all exporting to Europe. Debt bondage is a form of forced labour, violating the ILO Forced Labour Convention and Abolition for Forced Labour Convention. The UK natural stone industry is facing the challenge of complicity in modern slavery and child labour.

But what obligations under these conventions are ‘applicable’ to economic operators? The conventions are international treaties. The obligations in them are obligations of states. Following that line, we could try to convince ourselves that reg 18(4) is empty, meaningless, because nothing in the conventions is ‘applicable’ to economic operators. An interpretation that gets us to that conclusion is surely the wrong interpretation. Irish courts will not favour a construction of legislation that gives it no effect at all, particularly when the legislation is transposing EU law.

The state obligations in ILO core conventions can be (re)framed as rights. Indeed, that is what the ILO did in its 1998 Declaration on Fundamental Principles and Rights at Work.

On this formulation, the ‘applicable’ obligations of economic operators are obligations not to infringe those rights that are ‘applicable’. Which rights are applicable? We can look to South Africa for help. The word ‘applicable’ is also used in section 8(2) of the Constitution of South Africa, which makes a provision of the Bill of Rights horizontally binding (on individuals, not just the state) ‘if, and to the extent that, it is applicable’. The Constitutional Court held in 2002 that the right to freedom of expression binds individuals because of its ‘intensity’ and the potential for people other than just the state to invade it.

If these are the criteria, both would seem to render the ILO convention rights ‘applicable’ to economic operators.

Responsibility for supply chain

What responsibility do the landscape architect, the main contractor, the landscaping subcontractor, and the stone importer have for labour infringements down the supply chain, of which they had no knowledge?

Florian Wettsetin points out that business involvement in human rights violations is often not direct, but through involvement with someone else who is the direct or principal perpetrator of harm; indeed, these are the most significant forms of corporate involvement in human rights infringement, both in number and severity. Sabine Michalowski wrestles with the difficulty of distinguishing lawful commercial activities from those that involve complicity in human rights harm. This is no different in public supply chains, as Claire Methven O’Brien and Olga Martin-Ortega argue.

The text of regulation 18(4)(a) (‘an economic operator shall comply with applicable obligations’) perhaps suggests that economic operators are responsible for their own acts (and maybe omissions), rather than assuming absolute, non-delegable, or vicarious responsibility for supply chain violations. But that may not be enough to get these defendants away. If their acts—specifying, buying, supplying products of child labour, slavery or extreme exploitation—have caused or contributed to harm, have they complied with the applicable obligations?

Causation is not always established or negated by a straightforward ‘but for’ test. It is laden with policy and moral considerations. When airplanes were seized from Kuwait Airways Corp during the 1990 Iraqi invasion of Kuwait and given to Iraq Airways Co, the Iraqi airline was held liable, even though its wrongdoing could not be directly linked to the claimed losses. The House of Lords made it clear that causation depends on value judgment and the purpose of the tort in question. In workplace disease cases, where an illness can have several potential causes, English courts hold that causation can be established by showing the employer made a ‘material contribution’ to an employee’s illness, or increased the risk. The Irish Supreme Court showed no enthusiasm for diluting the ‘but for’ causation test in a medical negligence case. But it drew attention to the Civil Liability Act, which provides that when two or more are at fault causing harm, they are each liable for the whole of the harm. This applies when it is impossible to establish which of them caused the harm. Also, independent third party wrongdoing will not break the chain of causation when the whole point of the scheme is to protect against the sort of thing that happened.

Drawing together these strands, a designer who specifies products of labour abuse, or a contractor or supplier who buys or supplies them, might be found to have ‘caused’ harm.

Due diligence may be relevant. Human rights due diligence is being increasingly recognised as an important element of the corporate responsibility to respect human rights, notably in the UN Guiding Principles on Business and Human Rights, and in legislation such as the non-financial reporting directive, the UK Modern Slavery Act 2015 and France’s 2017 corporate vigilance law. It could come to operate as a defence, as in Ireland’s Criminal Justice (Corruption Offences) Bill 2017, s 18 or the UK Bribery Act 2010, s 7.

… that apply at the place where the works are carried out or the services provided …’

This element of Ireland’s regulations is not actually in the equivalent part of the Directives themselves. Recitals to the Directives do state the importance of economic operators complying with obligations that apply at the place where works are executed or services provided—but not in relation to the ILO core conventions, apparently on the basis that all the member states have ratified them.

For Samita’s claim, the ‘place where the works are carried out’ is probably the quarry in India. What obligations under ILO conventions apply there? While India has a minimum working age of 14 (18 for hazardous work), its ratification of the ILO Minimum Age and Worst Forms of Child Labour Conventions only took effect on 13 June 2018.

The ILO has declared that all of its members have an obligation to respect, promote and realise the fundamental rights underlying the core conventions, including the elimination of forced and compulsory labour and the effective abolition of child labour. These rights may have universal application in international law, especially to business enterprises.[i] Certainly forced labour, a form of slavery.

Treating the ILO conventions as universally applicable would be a way to interpret the Irish regulations consistently with the directives they transpose. As already noted, the directives don’t give the ILO conventions a territorial qualification.

 3.2 Liability of contracting authorities

Reg 18(4)(b) of the Irish public sector procurement regulations mandates contracting authorities to put a clause in their public contracts requiring economic operators to comply with paragraph (a). What if a contracting authority ticks this box, includes the clause, but does nothing to check whether the contractor has actually complied?

While this contracting authority may have complied with Irish reg 18(4)(b), it has probably not complied with the Directive, which requires member states to ‘take appropriate steps’ to ‘ensure’ that economic operators comply with applicable obligations under ILO conventions. Thus, a contracting authority may have to do more than just include the required clause in its contracts.

3.3 Jurisdiction and applicable law

The Irish court would have jurisdiction to hear Samita’s claim against Irish contracting authorities and companies at home in Ireland. It could also hear related claims against other defendants, as long as the claims against domiciliaries are not bound to fail.

Unless an exception applies, the Irish court would be required by art 4(1) of the  Rome II Regulation to decide Samita’s claim under the law of India, the place where her claimed harm occurred. But, under Rome II art 16, the court would exceptionally apply Irish law if reg 18(4) is an overriding mandatory provision requiring it to do so. Reg 18(4) has several of the markers of an overriding mandatory provision identified by Liesbeth Enneking: (semi-) public regulations that intervene in private legal relationships, for example rules on working hours and working conditions, rules flowing from EU law or of public international law, ‘potentially also including certain provisions on the protection of fundamental/human rights’.

In addition, reg 18(4) could also be applied under Rome II, art 17, which provides that, in assessing the defendant’s conduct, account must be taken of the rules of safety and conduct in force at the place and time of the event giving rise to the liability. This could include due diligence requirements in a company’s home state.

4. Conclusion

Businesses today are exposed to a growing catalogue of legal and reputational risks such as data security and privacy, bribery and corruption, money laundering and terrorist financing, workplace safety and environmental impact.

Complicity in modern slavery and other serious labour rights abuses can be added to this list. As this post has shown, procurement law is one potential basis on which victims could seek legal remedies against government buyers and their suppliers. Public procurers and their private suppliers should urgently consider whether their policies and due diligence machinery are adequate to address emerging liabilities associated with their procurement activity.


This post is based on Eamonn Conlon’s chapter in “Public Procurement and Human Rights: Opportunities, Risks and Dilemmas for the State as Buyer” edited by Olga Martin Ortega and Claire Methven O’Brien (Edward Elgar, forthcoming 2019)


[i] Isabel M Borges, ‘Safeguarding Human Rights through Public Procurement Law: Recent Developments in Norway’ (2018) 27 Pub Procurement L Rev NA121