Rana Plaza incident: The Right to Remedy

The Rana Plaza Incident:
The Right to Remedy
Bachelor Thesis
Corporate Social Responsibility
Author:
Isabelle Attallah
1
University College of Utrecht

Table of Contents
List of Abbreviations p. 3
Chapter I – Introduction p. 4
1.1. The Rana Plaza Incident p.4
1.2. Business & Human Rights p.5
1.3. Outline p.8
Chapter II – Factors for legal feasibility of civil liability claims p.9
2.1. Introduction p.9
2.2. Jurisdiction p.9
2.2.1. Jurisdiction in European Union Member States courts p.10
2.2.2. Jurisdiction in United States courts p.12
2.3. Applicable Law p.15
2.3.1. Applicable law in EU Member States courts p.15
2.3.2. Applicable law in the United States courts p.17
2.4. Substantive Legal Basis p.18
2.4.1. Legal basis in the United States p.19
2.4.2. Legal basis in the European Union p.20
2.5. Practical and procedural circumstances p.21
2.5.1. Introduction p.21
2.5.2. Complex nature of litigation p.22
2.5.3. The burden of proof p.22
2.5.4. The limitation period p.23
2.5.5. Financial legal costs p.23
2.5.6. Access to remedy p.23
2.5.7. Conclusion p.24
Chapter III – Case Law Analysis p.24
3.1. Introduction p.24
3.2. Doe v. Wal-Mart Stores Inc. p.25
3.3. Union Needletrades v. The Gap et al p.28
3.4. Lesson learned about the cases p.32
Chapter IV – Alternative legal Options p.33
4.1. The joint-employer doctrine p.33
4.2. Claims under “deceptive commercial claims” p.36
Chapter V – Conclusion p.38
Bibliography p.41
2

List of Abbreviations
ATCA Alien Tort Claims Act
ATS Alien Tort Statute
CCC Clean Clothes Campaign
CNMI United States Commonwealth of the Northern Marianas Islands
EU European Union
FLSA Fair Labor Standards Act
NGO Non-Governmental Organization
SRSG Special Representative of the Secretary-General of the United Nations
TVPA Torture Victims Protections Act
UDHR Universal Declaration of Human Rights
UNGP United Nations Guiding Principles on Business and Human Rights
UN United Nations
USA United States of America
US United States
USC United States Code
3

The Rana Plaza Incident: The Right to Remedy
“We are guided by the principle that success in business is dependent on putting human
issues at first.” – Phillips Van Heusen Corporation
4
Chapter 1 – Introduction
1.1. The Rana Plaza incident
One year ago, on April 24th 2013, the collapse of the Rana Plaza building led to
more than a thousand victims and approximately 2,500 injured workers in Savar in
Bangladesh.1 The collapse of the eight-story building owned by Sohel Rana was caused
by the poor construction of the building as well as the illegal presence of the garment
factories.2 The Rana Plaza incident was considered as one of the deadliest industrial
accidents in the last 30 years since the Bhopal incident in India.3
Precisely a year after the collapse of the Rana Plaza, victims are still waiting for
compensation. What is the reason behind this? The Bangladeshi government and non-governmental
organizations (NGOs) have been working towards a Donors Trust Fund to
compensate the victims of the Rana Plaza incident.4 This Trust Fund works on the
contribution of the brands whose labels were found in the ruins and other private donors.5
However, these brands have been rejecting their responsibility in this incident. The textile
industry being based on a complex chain of subcontractors allows each link of the chain
to evade its responsibility by blaming the following link.6 Therefore, the question that
this paper will seek to answer is: what is the feasibility of civil liability claims brought by
victims of corporate related abuses in host countries against retailers in their home
countries for obtaining compensation?
The underlying issue of these civil liability claims cases is the access to remedy
for workers who suffered from the unsafe and unfair labor practices in the supply chain.
On the one hand, the victims have the possibility to file claims against the directly
involved actors, meaning the building and factory owners, in their own country. Even if
1 Motlagh, J. (2014). Ayres, A. (April 24, 2014).
2 Idem, p.64.
3 Labowitz, S., & Baumann-Pauly, D. (April 2014). p.9.
4 Rana Plaza Arrangement website.
5 Idem.
6 NCP Report on Implementation of the OECD Guidelines in the textile and clothing sector. (2013). French
National Contact Point for Implementation of the OECD Guidelines for Multinational Enterprises, p. 7.

the court would entitle them to compensation, these actors often do not have the financial
means to pay for the substantive damages claims.7 On the other hand, the victims can
bring a claim against the retailers in their home countries, which are considered the
indirectly involved actors. Often these indirect actors are the ones with the ‘big pockets’
and also considered responsible by the victims and therefore, they hope to have more
chance to get compensation for the harm they suffered. The laws in host states are often
corrupted or full of holes, which leaves the victims of corporate related abuses with no
other solution than access justice in home states of the retailers.8
The main focus of this thesis will be on the access to remedy in home countries
for victims of corporate related abuses in host countries and therefore the emphasis will
lay on tort law in Western society systems. Moreover, through the Rana Plaza incident,
the distribution of responsibilities between retailers and suppliers will be analyzed. Can
the retailers in the home countries be held accountable for harm caused in host countries
in the same way than parent companies can be held accountable for their subsidiaries
through civil litigation claims?
1.2. Business & Human Rights
In the wake of globalization over the past decades, companies have significantly
changed their ways of doing business, both on a national but even more on an
international level. Companies, always seeking for more profit, delocalized their
manufacturing activities to underdeveloped countries with lower labor costs but also with
clearly less strict labor rules and laws.
This context has led to the violation of human rights, by many companies causing
damage and harm to many individuals. These people are trying today to obtain redress for
the harm they suffered, in spite of complicated access to justice and inequities in the legal
standards between developing and developed countries. Several attempts have been made
under international law to establish a number of obligations for companies. However,
these attempts have been meager.
5
7 Enneking, L.F.H. (2009), p.905-907.
8 Dam van, C. (2011), p.228-229.

In 2005, the Secretary General Kofi Annan appointed John Ruggie as his “Special
Representative of the Secretary General (SRSG) on the Issue of Human Rights and
Transnational Corporations and other Business Enterprises” to identify the standards of
corporation responsibility and accountability for businesses and human rights.9 During
his mandate, he first produced in 2008 a report with a three pillar framework: Protect,
Respect and Remedy: A framework for business and Human Rights.10 The next three
years of his mandate, John Ruggie worked on the United Nations Guiding Principles for
Business and Human Rights (UNGPs) endorsed in June 2011 by the United Nations (UN)
Human Rights Council.11 The UNGPs were created to address and prevent the risk of
impact of business activities on human rights. These Guiding Principles contain the three
pillars defined in the 2008 framework: (1) the state duty to protect human rights; (2) the
corporate responsibility to respect human rights and (3) access to remedy.12
The third pillar, access to remedy, is an important component of the two other
pillars.13 The right to remedy provides the means through which victims of corporate
related abuses demand a suitable response for the harm they have suffered, reparations
and sanctions.14 Remedy can be provided through judicial or non-judicial grievance
mechanisms. First of all, effective judicial mechanisms entail that victims are able to
bring their claim in front of domestic courts without having barriers such as lack of
resources, corruption of the legal system or the high costs of bringing the claim.15
Secondly, the non-judicial grievance mechanisms complete the judicial mechanisms and
can be mediation-based.16 Moreover, these non-judicial mechanisms are based on eight
criteria: legitimate, accessible, predictable, equitable, transparent, rights-compatible, a
source of continuous learning and based on engagement and dialogue.17 In other words,
non-judicial grievance mechanisms need to provide for effective access to remedy.
9 How to do business with respect for human rights: a guidance tool for companies. Business & Human
Rights Initiative: Global Compact Network Netherlands, p.20.
10 Idem, p.20.
11 Idem, p.20.
12 Ruggie, J. (2008), p. 191-194.
13 Eijsbouts, J. (2011),p. 3-4.
14 Injustice Incorporated: Corporate abuses and the human rights to remedy. (2014). Amnesty
International, p. 29.
15 Ruggie, J. (2011), p. 28-30.
16 Idem, p. 30.
17 Ruggie, J. (2011), p. 33-34.
6

However, the UN Guiding Principles remain weak when it comes to addressing
the issue of compensations in cases where the company is not responsible under domestic
law. Indeed, they suggest that in cases where no legal responsibility has been determined,
but where the corporation is nevertheless to some extent responsible for the harm that
occurred, it is left to the company to decide whether or not it will play a role in providing
for remediation.18 The UNGPs are only guidance for companies to respect human rights,
not an obligation to adopt or to respect them, even if they aim to provide an ‘authoritative
global standard’.19 New international legal obligations are not created by the UNGPs.20
Moreover, the implementation by companies of the UNGPs does not mean that they will
respect all international human rights, since the UNGPs do not incorporate human rights
law or other mandatory standards for companies with respect to human rights.21
In most developing countries, legal standards for health and safety measures are
very low. The rapid economic growth in some of these developing countries has created
the important challenge of having to enhance their legal, health and safety standards as
well as infrastructure development.22 The UNGPs, therefore, aimed to provide a global
standard to prevent and address the bigger injury risks in host countries due to their weak
labor laws and health and safety measures. In Bangladesh, after the Rana Plaza incident,
workers, employers and government concluded a tripartite agreement in January 2013
aiming to strengthen safety measures in textile factories.23
Furthermore, the difficulty in relationships with business partners in the supply
chain is to determine who is responsible for other people’s harm. The complexity and
structure of a supply chain make it extremely difficult to define the boundaries of the
business relationships and therefore, to determine the responsibilities of the retailers
when an accident occurs.24 Especially in the case where there are hidden subcontractors,
the retailer is not even aware of. Retailers claim that their relationship does not extend
18 Michalowski, S. (2014), chapter 4.
19 UN Human Rights Council: Weak stance on business standards. Human Rights Watch.
20 Huijstee van, M., Ricco, V., & Ceresna-Chaturvedi, L. (2012), p. 12-13.
21 Idem, p.12-13.
22 Labowitz, S., & Baumann-Pauly, D. (April 2014), p. 16.
23 NCP Report on Implementation of the OECD Guidelines in the textile and clothing sector. (2013).
French National Contact Point for Implementation of the OECD Guidelines for Multinational
Enterprises,p.1-2.
24 Idem, p.19.
7

beyond the main subcontractor because they have no influence over the various hidden
subcontractors as they ignore who they are and as such no ‘direct link’ can be established
between the retailer and these hidden subcontractors.25 However, NGOs and retailers do
not seem to agree on the boundary of these business relationships. NGOs have a broader
interpretation of these business relationships as they consider it encompasses the entire
supply chain, contrary to the retailers who consider their relationship does not go beyond
the contractual relationship with the main supplier.26
1.3. Outline
This thesis will provide an overview of the feasibility of civil liability against
retailers for abuses committed abroad. National civil courts do have the potential to
provide appropriate remedies and redress for victims of corporate related abuses but
many times these national civil courts lack the jurisdiction or adequate procedural rules to
hear these cases. Victims’ difficulties to obtain access to justice and effective remedies in
their own country led them to search for remedies in the home courts of retailers.
In order to answer the question, this thesis will be divided into four parts. Chapter
two will discuss the different factors to determine the legal feasibility of civil liability
claims in home countries for abuses of human rights in host countries. The third chapter
will be a case analysis, in order to analyze the relationship between the retailers and their
suppliers and the distribution of responsibility between the two in the United States and
in the European Union, as well as the path that victims need to go through to access
remedy. Chapter four will look at the alternative legal options to bring claims against
retailers for the harm that occurred in their supply chain and finally, chapter five will
conclude on the findings of this study.
25 NCP Report on Implementation of the OECD Guidelines in the textile and clothing sector. (2013).
French National Contact Point for Implementation of the OECD Guidelines for Multinational Enterprises,
p. 19
26 Idem, p. 21.
8

Chapter 2 – Factors for legal feasibility of civil liability claims against retailers
2.1. Introduction
In the current context of globalization, retailers are seeking to produce goods
more cheaply than in their more expensive and stricter domestic labor market, in order to
generate more profits in this way. However, by exploiting less strict labor standards in
developing countries, retailers maintain and sometimes even generate (by their pressing
demands) bad working conditions in the supply chain.27 The question here is: can
retailers be held accountable by the court for labor violations in their supply chain? A
second question is: can victims obtain redress for these corporate related abuses in the
retailers’ home countries?
In order to answer these two questions, the following factors for legal feasibility
of civil liability claims against retailers will be analyzed: (1) whether retailers’ home
courts have jurisdiction to hear the case, in other words, jurisdiction issues; (2) what law
should be applied to resolve the legal issue, the law of the host state or the law of the
home state; (3) the substantive legal basis and (4) other procedural and practical
circumstances.28 This analysis will be made for both the European legal system and the
United States legal system since the European Union Member States and the United
States are the major countries where headquarters of the retailers are situated.
9
2.2. Jurisdiction
First of all, the issue of jurisdiction is the first factor to be determined by the
court, especially in civil liability claims with international issues brought before domestic
court. The main question that the court will ask itself is: whether and to what extent the
court has jurisdiction on the matters brought to it?29
The issue of jurisdiction is an important matter in civil litigation claims against
retailers in home countries for violations committed in the host countries. The problem at
stake in these cases is that the claims are brought in a different country (home state) than
where the harm occurred (host state).30 It is, therefore, not given that the home states have
27 Maryanov, D.C. (2010), p.402-403.
28 Meeran, R. (2011), p.10-11.
29 Enneking, L.F.H. (2011), p.133-134. International commission of jurists, expert legal panel. (2008), p.49.
30 Enneking, L.F.H. (2011), p. 133-134.

jurisdiction to hear these trans-boundary cases.31 Establishing jurisdiction is especially
difficult and complex when courts are asked to determine the responsibility of retailers
over the acts of their suppliers abroad. The domestic rules of private international law
determine whether these domestic courts have jurisdiction over these cases.
2.2.1. Jurisdiction in European Union Member States courts
In Europe, the Brussels I Regulation on jurisdiction and the recognition and
enforcement of judgments in civil and commercial matters (Brussels I Regulation)
applies within the European Union (EU) Member States and determine the exercise of
jurisdiction in cases of cross-border civil and commercial matters. The Brussels I
Regulation is binding and applicable on all EU Member States. The Brussels I Regulation
in its general provision establishes that ‘persons domiciled in a Member State shall,
whatever their nationality, be sued in the courts of that Member State’32 and ‘a company
or other legal person or association of natural or legal persons is domiciled at the place
where it has its (a) statutory seat, or (b) central administration, or (c) principal place of
business’.33 In other words, the Brussels I Regulation only provides jurisdiction for
companies that have their headquarters in one of the EU Member States.34 However, the
Brussels I Regulation also allows victims of trans-boundary cases to sue a European
company in another EU Member State than the one they are domiciled in.35 Moreover, in
situations where the cases fall outside the scope of the Brussels I Regulation, domestic
rules on international civil jurisdiction establishes the courts’ jurisdiction on these
cases.36 These rules might be broader than the Brussels I Regulation and therefore, some
EU Member States might be able to have jurisdiction over cases that they would not be
able to judge under the Brussels I Regulation.37 Furthermore, since 2005, EU Member
State courts cannot stop proceeding on the grounds of the forum non conveniens doctrine,
as in common law countries, in cases brought against EU domiciled defendants, where
31 Enneking, L.F.H. (2011), p.133-134.
32 Article 2 (1) of Brussels I Regulation.
33 Article 60 (1) of Brussels I Regulation.
34 Skinner, G., McCorquodale, R., & De Schutter, O. (2013), p.5-6.
35 Enneking, L.F.H. (2011), p. 146. Article 5 Brussels I Regulation
36 Idem, p.147. Article 4(1) Brussels I Regulation
37 Enneking, L.F.H. (2009), p.916-917.
10

the alternative location is situated outside the EU.38 The forum non conveniens doctrine
allows courts to dismiss a case when the court considers that another court or forum is
better suited to hear the case.39 The plaintiff may however re-file the case in a more
appropriate court. Both the court and the defendant may invoke the forum non conveniens
doctrine.40 Moreover, a case will not be dismissed under this doctrine under two
conditions: first, if there is no other court to hear the case and secondly, if the alternative
forum’s judicial system is inadequate.41 Sometimes the adequacy of an alternative
forum’s remedy is also considered as a decisive factor in the granting or not of a
dismissal.42
- Outcome for the Rana Plaza victims
If the Rana Plaza victims would decide to bring a civil liability claim against the
European retailers in their home countries, would the court have jurisdiction over their
case? As abovementioned, EU Member States only have jurisdiction over companies that
have their headquarters in the EU, which is the case of the retailers involved in the Rana
Plaza incident. However, the victims are not domiciled in any EU Member State since
they are from Bangladesh and according to Article 2(1) of the Brussels I Regulation, the
person needs to be sued in the Member State where it is domiciled.43 Since the victims
are nationals of non-EU Member States, it is not certain that they will be subject to
European Union law and that the court will have jurisdiction over the subject matter of
the case.44 Nevertheless, domestic rules on international civil jurisdiction establish the
court jurisdiction on cases that fall outside the scope of the Brussels I Regulation;
therefore, the Rana Plaza victims might still have a chance to have a hearing of their case
depending on each individual EU Member State domestic rules on international civil
jurisdiction.
38 Meeran, R. (2011), p.12-14.
39 Forum non conveniens definition. Legal information institute. Cornell University Law School.
40 Idem.
41 Idem.
42 Idem.
43 Article 2(1) Brussels I Regulation.
44 Shine, P. (2010), p.451-453.
11

12
2.2.2. Jurisdiction in United States courts
- US Common Tort Law
In the United States, the courts have jurisdiction over broader issues than in the
EU Member States courts under Brussels I Regulation. In the United States, the court has
to determine that the court has first, personal jurisdiction over each of the defendants that
are sought to be held liable and second, subject-matter jurisdiction over the claim itself,
for cases with trans-boundary issues.45 Regarding the first element, personal jurisdiction,
the court usually defines that the presence of the defendant within the United States is
enough for the court to exercise jurisdiction.46 The second element, subject-matter
jurisdiction, can be established once the plaintiffs have decided on what legal grounds
they will base their case. On the one hand, the province of the federal courts decides
cases brought on the basis of the Alien Tort Statute. On the other hand, state courts
decide cases brought on the basis of US common tort law.47 The diversity jurisdiction is a
form of subject-matter jurisdiction, under 28 U.S.C. § 1332(a)(2), which allows US
courts to hear cases where the parties are citizens of different states or non-US citizens,
these parties are ‘diverse in citizenship’. Therefore, if all parties of one side are US
citizens and all the parties of the other side are non-US citizens, the US court will have
diversity jurisdiction.48 Furthermore, the United States is a common law country, and
therefore, on the basis of the doctrine of forum non conveniens, the courts may reject a
claim if the case can be tried in a more adequate forum.49 However, if the alternative
forum does not allow for effective and satisfactory remedy, the court might decide to
allow the case.50 Therefore, if the host country courts offer unsatisfactory result, the US
state court will hear the case.51
45 Enneking, L.F.H. (2011), p.140-141.
46 Joseph, S. (2005), p.83-84.
47 Enneking, L.F.H. (2011), p.140-142.
48 Maryanov, D.C. (2010), 413.
49 Idem, p. 142-143.
50 Idem, p. 142-143.
51 Idem, p.142-144.

13
- Alien Tort Statute
The Alien Tort Statute (ATS) (also called the Alien Tort Claims Act) was created
as part of the Judiciary Act in 1789.52 The first case to use the ATS was in 1980, the
Filártiga case.53 This act allows US courts to have jurisdiction in cases of international
human rights violations and is part of the United States Code that states under 28 U.S.C.
§1350: ‘the district court shall have jurisdiction of any civil action by an alien for a tort
only, committed in violation of the law of nations or a treaty of the United States’.54
Victims (foreign citizens) of human rights violations outside the United States are able to
seek remedies under the Alien Tort Claims Act (ATCA).
In 2010, in the Kiobel v. Royal Dutch Petroleum Co case, the Second Circuit
Court of Appeals held that federal courts do not have subject-matter jurisdiction over
civil claims against corporations/companies on the issue of norms of customary
international law violations under the ATS.55 In 2011, the plaintiffs appealed the lower
court’s decision and brought the case to the Supreme Court. However, the Supreme Court
asked the plaintiffs to present additional briefs in order to hear the case again.56 In
October 2012, the Supreme Court heard the case again and gave its outcome on April 17,
2013.57 The Supreme Court decided that the Alien Tort Statute does not apply and does
not have jurisdiction over cases where the harm occurred outside of the United States.58
In other words, the ATS can only be used, according to this judgment, when non-US
citizens, aliens, bring a claim for a tort that occurred in the United States. As a
consequence, the case was dismissed by the Supreme Court.
The Kiobel case led to the conclusion that under ATS, corporate liability claims
are not supported by international law.59 Moreover, it also led to the uncertainty of using
domestic law beyond the limits of a country’s territory. Therefore, the Kiobel v. Royal
Dutch Petroleum Co case could have an impact on other trans-boundary claims brought
52 Dam van, C. (2011), p.232-234.
53 Idem, p. 232-234.
54 28 United States Code § 1350.
55 Enneking, L.F.H. (2011), p.141-142. Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 120 (2d Cir.
2010).
56 Business and Human Rights Resource Center, see Shell lawsuit. (http://business-humanrights.
org/en/shell-lawsuit-re-nigeria-kiobel-wiwa#c9306)
57 Idem.
58 Idem.
59 Berkowitz, P., Congiu, M., Kloosterman, J., Savage, E., & Matson, M. (April 2013).

under US law. In the situation of holding retailers accountable for the human rights
violations committed in their supply chain, this case could have an effect. Nevertheless,
for the moment the impact of the Kiobel case on claims between retailers and suppliers is
still unclear.60 As a result, this may lead to the extinction of company accountability
under the ATS.61 Moreover, this may indicate that victims of corporate related abuses
will have to bring their claim under US common tort law in US state courts or in their
host country courts.62
Assuming that the Rana Plaza victims brought a claim against US retailers in their
home states, would US courts have jurisdiction over that case? As mentioned already, US
courts need to determine personal jurisdiction and subject-matter jurisdiction. First of all,
concerning personal jurisdiction, the victims are from Bangladesh, and the retailers’
headquarters are in the United States. Therefore, under 28 U.S.C. §1332(a)(2), foreign
plaintiffs have diversity jurisdiction, if on the one side there are US citizens and on the
other side there are non-US citizens, whether plaintiffs or defendants.63 As a result, the
court would have personal jurisdiction over this case. Secondly, subject-matter
jurisdiction will depend on what legal grounds the case is brought under: the ATS or on
the basis of US tort law. If the Rana Plaza victims bring their case under the ATS, the
court might not have jurisdiction due to the Kiobel v. Royal Dutch Petroleum Co case:
‘we must conclude, therefore, that insofar as plaintiffs bring claims under the ATS
against corporations, plaintiffs fail to allege violations of the law of nations, and
plaintiffs’ claims fall outside the limited jurisdiction provided by the ATS’.64 However,
since it is still unclear whether the ATS has an impact on the cases brought by victims of
human rights violations against retailers in their home states, the Rana Plaza victims
might still be able to bring their claim under the ATS. On the other hand, if the Kiobel
case would have an impact on these types of cases, regarding retailers and their supply
chains, the Rana Plaza victims will not be able to bring their case under the ATS, since
60 Berkowitz, P., Congiu, M., Kloosterman, J., Savage, E., & Matson, M. (April 2013).
61 Enneking, L.F.H. (2011), p. 123-124.
62 Idem, p.144-145.
63 Meeran, R. (2011), p.413. 28 United States Code §1332(a)(2).
64 Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 120 (2d Cir. 2010). §120.
14

the harm was caused in Bangladesh and not in the United States as the ATS requires
under the Kiobel case.
Moreover, under US common tort law, the Rana Plaza victims could bring their
claim to the US state court since it allows cases under diversity jurisdiction. The court
could decide to dismiss the case under the forum non conveniens doctrine and consider
the Bangladeshi court as a more adequate forum to bring the case. However, in cases
where the US state court considers that the host country courts provide for unsatisfactory
outcome and remedies, it has jurisdiction to hear these cases. Therefore, it might be
complicated for the Rana Plaza victims to access remedy in the home courts of the
retailers.
15
2.3. Applicable law
Once the court has established that it has jurisdiction to hear the case, the
following question to answer is: on the basis of what law should the legal matters be
resolved? In other words, the court will look at what law applies to the issue since two
countries are usually involved in these trans-boundary cases. Therefore, the law of these
two countries could be applied to resolve the case. In order to determine the applicable
law, the court will choose on the basis of the domestic rules of private international law
that apply in the home country.65 These domestic rules of private international law will
establish which system of law of the different countries involved in the dispute will rule
the case. Depending on the system of law that the court will use, the outcome of the case
may differ. Moreover, the statute of limitation is different in each country and therefore,
choosing the law of one country rather than the one of another country also has an
influence on how long after the facts you can still bring the case in front of the court.
2.3.1. Applicable law in EU Member States courts
In Europe, the choice of law is determined by the Rome II Regulation on the law
applicable to non-contractual obligations (Rome II Regulation). Article 15 of the Rome II
Regulation provides the scope of the applicable law, as follows:
65 Enneking, L.F.H. (2011), p.134-135.

‘(a) The basis and extent of liability, including the determination of persons who
may be held liable for acts performed by them; (b) the grounds for exemption
from liability, any limitation of liability and any division of liability; (c) the
existence, the nature and the assessment of damage or the remedy claimed; (d)
within the limits of powers conferred on the court by its procedural law, the
measures which a court may take to prevent or terminate injury or damage or to
ensure the provision of compensation; (e) the question whether a right to claim
damages or a remedy may be transferred, including by inheritance; (f) persons
entitled to compensation for damage sustained personally; (g) liability for the
acts of another person; (h) the manner in which an obligation may be
extinguished and rules of prescription and limitation, including rules relating to
the commencement, interruption and suspension of a period of prescription or
limitation’.66
This article does not make the interface between the applicable law (substance) and the
law of the forum (procedure) any easier, as it makes no reference to substance and
procedure.67
It is therefore up to the court to decide, based on the Rome II Regulation, whether
the law of the home country where the case is heard will be applied or whether the law of
the host country where the harm occurred will be applied. In Europe, since 2009, the
Rome II Regulation has unified the rules on the choice of law that apply to trans-boundary
tort cases in EU Member States courts.68 Therefore, according to Article 4(1) of
the Rome II Regulation, all EU Member States courts have to apply the law of the
country where the harm has occurred in cases of trans-boundary issues.69 As a result, the
tort law of the host country will be the applicable law. Nevertheless, there are some
exceptions to the Rome II Regulation, in cases of environmental damage; there is a
66 Article 15 Rome II Regulation.
67 Ahem, J., & Binchy, W. (2009), p.43-44.
68 Dam van, C. (2011), p. 231-232. Enneking phd, p.160-161.
69 Article 4(1) Rome II Regulation: ‘unless otherwise provided for in this Regulation, the law applicable to
a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage
occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of
the country or countries in which the indirect consequences of that event occur’.
16

possibility of using the law of a different country, otherwise, the tort law of the host
country is used for all other cases.70
Assuming that the Rana Plaza victims brought a claim against European retailers
in their home states. The applicable law would be Bangladeshi tort law according to
Article 4(1) of the Rome II Regulation, since the harm occurred in Bangladesh with the
collapse of the Rana Plaza building. Moreover, the Rana Plaza case not being about
environmental damage, there is no possibility to use the law of the EU Member State
where they are bringing their claim. The victims therefore will have access to remedy and
compensation to the extent mentioned under Bangladeshi tort law.
17
2.3.2. Applicable law in US courts
In the United States, as in Europe, the law applied to trans-boundary cases, where
more than one country is involved, was the law where the tort occurred under the lex loci
delicti rule (Latin for the law of the place where the delict was committed). However, in
the 1950s, a number of transformations in the law led to the change of the establishment
of the applicable law.71 These transformations in the law did not give rise to a uniform
and single system.72 Each US State with its own legal system had a different approach to
establish the applicable law in cases of conflict of law. The courts became more flexible
on the issue of conflict of law meaning that instead of choosing the law of the country
where the tort occurred, the court might decide to choose its own law if it is in the best
interest of the parties, especially for the plaintiffs.73 US courts can choose between three
sources of law: international law, host state law (where the harm occurred) or home state
law (where the claim is brought).74 However, most of the time, the law of the state where
the harm occurred is applied, except if the law of that state goes against public policy of
70 Dam van, C. (2011), p.231-232. Article 7 Rome II Regulation.
71 Symeonides, S.C. (2009), p. 345-347. Enneking, L.F.H. (2011), p.157-158.
72 Symeonides, S.C. (2009), p.346-347.
73 Enneking, L.F.H. (2011), p. 157-159.
74 Maryanov, D.C. (2010),p. 413-414.

the state where the trial is proceeding.75 Therefore, US courts have the possibility to
apply the law they consider in the best interest of the parties.
What if the Rana Plaza victims brought a claim against US retailers in their home
states, what would the applicable law be? In most cases, the law of the state where the
harm occurred should be the law applied to the case, meaning Bangladeshi law in the
case of the Rana Plaza incident. However, US courts have ‘diverse and inconsistent’ rules
to choose the applicable law.76 In the Doe I v. Unocal Corp. case, the court rejected to
apply Burmese law because it was in conflict with US public policy and because
Burmese law is vague.77 Therefore, US law was applied on the case. In the Rana Plaza
case, logically Bangladesh tort law should be applied. However, there is very little to no
reference to tort law in Bangladeshi law, as it has not yet been introduced in
Bangladesh.78 As a result, US courts might consider it too insufficient to apply it to the
case and therefore choose US tort law instead.
18
2.4. Substantive Legal basis
The third factor to establish the feasibility of civil liability claims is the
substantive legal basis upon which the case can be brought. Retailers have been
confronted with claims of bad working conditions or child labor in their supply chain. As
a result, civil liability claims have been filed against them. These civil claims are based
on the basis of tort law, especially ‘negligence’ under common law countries such as the
United States and the United Kingdom or ‘delict’ under civil law countries such as some
Member States of the European Union, with as a principal purpose to provide the victims
with compensation for the harm they suffered.79 Furthermore, in order to determine
whether the retailers can be held accountable/liable for these human rights violations a
number of elements need to be analyzed.
75 Enneking, L.F.H. (2011), p.159-160.
76 Farrell, N. (2013), p.1517.
77 Doe I v. Unocal Corp., 395 F.3d 932 (9th Cir. 2002). Enneking, L.F.H. (2011), p.159-160.
78 Tariq Iqbal, A.S.M. (2014), p.168-169.
79 Meeran, R. (2011), p.3.

19
2.4.1. Legal basis in the United States
First of all, in the United States under the common law tort claims, victims can
bring a claim under negligence if the following four elements are proven: (1) duty of
care; (2) breach of duty; (3) causation; and (4) injury.80
The first element to be proven by the court is the duty of care of the retailer
towards the employees of its suppliers. The presence of codes of conduct can be one way
to establish that there is a duty of care between the retailers and the suppliers’ employees,
depending on the provisions present in this code of conduct.81 Moreover, if the retailers
have any control over the actions of its suppliers, a duty of care can be established.82 The
last way to determine such a duty is if the retailer makes any public declarations on an
implied duty towards the employees of its suppliers.83
Once the court has established the duty of care, the second element has to be
proven, the breach of duty. If the retailers had a duty of care towards the employees of its
suppliers but failed to protect them or did not provide them with good working
conditions, then the court can determine that a breach of duty has occurred. If the retailers
are aware of the risk of bad working conditions and the use of child labor in their supply
chain, the question remains whether they took the necessary precautionary measures.84
Retailers or even companies in general are often the ones with the best position to reduce
abuses in the supply chain.85 Therefore if they fail to do so, a breach of duty has occurred
and the retailers failed to live up to their standards.
The third element is causation, which means that the court will look at whether
there is a link between the harm that occurred in the supply chain and the actions or
demand of the retailers.86 In other words, the retailers, with their purchasing create the
conditions (pressing demands, unrealistic deadlines) in the supply chain and therefore
indirectly lead the supplier to harm the workers.87 Moreover, as aforementioned, if the
retailer is the only company purchasing from the supplier, then the retailer agreed on the
80 Maryanov, D.C. (2010), p.429-431.
81 Idem, p.429-431.
82 Idem, p.429-431.
83 Idem, p.429-431.
84 Maryanov, D.C. (2010), p.429-431. Farrell, N. (2013).
85 Farrell, N. (2013), p.1505-1506.
86 Idem, p.1504-1506.
87 Idem, p. 1505-1506.

price, deadline and the conditions and has a responsibility in the working conditions in its
supply chain. However, if the supplier has more than one company purchasing goods, it
is more difficult to show causation.88
The fourth element to be proven by the court is whether injury occurred. If the
court can establish that the victims have been injured due to the failure of the retailers to
provide for good working conditions, the claim has been made.
If the court can prove these four elements then the retailers are liable for the bad
working conditions in their supply chain and their suppliers’ employees can bring a claim
against the retailers to ask for compensation for the harm they suffered.
2.4.2. Legal basis in European civil law countries
Secondly, in European civil law system, victims can bring their claim under
delict. However, tort law in the European Union is not harmonized, as a result,
substantive and procedure regulations vary in each EU Member State.89 If victims want to
bring a claim against European retailers under tort law, the elements to prove will vary
from one EU Member State to another. In France, for example, three elements need to be
proven by the court: (1) fault; (2) damage; and (3) causation.90
The first element to be established by the court is whether there was fault. The
court would have to prove that the defendant committed an unlawful act and therefore,
breached its duty of care towards the plaintiffs. In order to define an unlawful act and a
failure to behave, the reasonable man is taken as example, “bon père de famille” in
French.91 This would mean in the retailer supplier relationship that the retailer failed to
behave in a reasonable manner and therefore caused harm to the plaintiffs, in this case its
suppliers’ employees.
The second element to be proven by the court is damage. The notion of damage is
not often discussed in court since the two other criteria are the ones the court considers as
most important.92 However, the damage needs to be certain, directly linked to the plaintiff
88 International commission of jurists, expert legal panel. (2008), p.33-35.
89 Marcos, F., & Sánchez Graells, A. (2008), p.2-3.
90 Article 1382 Code Civil
91 Introduction to French tort law, p.2-3.
92 Idem, p.2-3.
20

and of course, it needs to exist. If these three criteria are reunited, the element of damage
is proven.
The court finally has to establish the third element, causation. There needs to be a
direct link between the fault and the damage in order to have liability; therefore causation
needs to arise between the two other elements.93 In a more concrete way, this means that
there needs to be a causal link between the failure of the retailer to behave in a reasonable
manner and the damage caused due to this failure. In other words, the question that the
court will ask itself is whether the behavior of the retailer caused the harm that the
victims are suffering from. If the answer to this question is positive, the court establishes
that there is a causal link between the fault and the damage. On the other hand, if the
answer is negative, the retailers are not responsible for the harm that occurred and
therefore, the victims cannot get compensation from the retailers.
These three elements constitute the legal basis on which the court will decide
whether the French retailers are responsible for, or have an obligation to protect the
employees of their suppliers under civil tort law. In other words, the court will decide
whether the retailers are responsible for delict towards the employees of their supply
chain. If the retailers are considered responsible, the victims will be entitled to
compensation and effective remedy.
21
2.5. Procedural and practical circumstances
2.5.1. Introduction
The last factors to determine the feasibility of civil liability claims are the
procedural and practical circumstances. This factor enumerates the different
circumstances that have an impact on bringing a claim before the home country courts
such as financial issues, the complexity of bringing such trans-boundary claims,
collecting evidence, burden of proof, finding legal expert, access to remedy and time
limitation. 94 Therefore, the question to answer is: which practical and procedural
circumstances are important in determining the feasibility of trans-boundary civil liability
claims against retailers in their home state courts?
93 Introduction to French tort law, p.2-3.
94 Meeran, R. (2011), p.16-18, 21-23.

2.5.2. Complex nature of the litigation
The first factor that might compromise the feasibility of civil liability claims is
their complexity, since in trans-boundary cases at least two or more countries are
involved. The retailers are present in developed Western countries such as the European
countries or in the United States whereas the suppliers are present in the developing
countries such as Bangladesh, India or China. When victims of human rights violations in
the supply chain bring a case against the retailers in Western societies, a number of issues
arise such as jurisdiction of the court, applicable law and the distribution of responsibility
between the two actors (retailers and suppliers). In Europe, the European Union
harmonized civil procedures for all the EU Member States with the Brussels I Regulation
and the Rome II Regulation making it therefore easier and less complex to bring such
cases.95 Nevertheless, these trans-boundary cases are often falling outside the scope of
these regulations and consequently are being handled through the domestic rules of each
EU Member State.96 Due to the different rules in the EU Member States and such a trans-boundary
claim might work in one EU Member States but be dismissed in another EU
Member State. In the United States, on the other hand, these trans-boundary cases are
more promising. As aforementioned, US courts are more flexible regarding jurisdiction
and choice of law. The ATS also allows non-US citizens to bring a claim under tort law
in US courts. The US civil system is therefore, today, the most favorable forum to seek
for remedies for trans-boundary cases.97
2.5.3. The burden of proof
A second factor determining the feasibility of civil liability claims is the burden of
proof. The burden of proof consists of defining who has to prove what in order to have an
outcome and judgment of the case.98 In the situation of trans-boundary cases, companies
have usually more information and more financial means and are more influential than
the plaintiffs who are coming from developing countries. It is for these reasons that they
have an advantage on the plaintiffs. In civil proceedings, both the defendant and the
22
95 Enneking, L.F.H. (2009), p.932-933.
96 Idem,p.932-933.
97 Meeran, R. (2011), p.2-3.
98 Enneking, L.F.H. (2011), p.189-190.

plaintiff have to prove the facts of the case. If one of the parties does not prove the facts,
the court will consider that the facts did not happen.99
2.5.4. The limitation period
The third factor to determine the feasibility of civil liability claims is the
limitation period. It consists of the time period, which an individual has, to bring a claim
after harm occurred. In trans-boundary civil liability claims, the limitation period might
be problematic since two or more countries are involved. Depending on the applicable
law, the limitation period might be different and therefore decide on whether or not the
case can still be heard. The limitation period is a very significant element, especially
when the court chooses the applicable law. For example, under English law, for example,
the limitation period to bring a tort claim is three years whereas in France, it is five
years.100 Under the ATS, there is no limitation period; as a consequence, most courts
apply a ten years limitation period based on the Torture Victims Protections Act
(TVPA).101
2.5.5. Financial legal costs
The fourth factor is the financial cost of bringing such claims. The victims are
bringing their claim to the home states of the retailers. These cases are often lengthy and
with no certain outcome due to the complexity of the cases. Therefore, it is expensive to
fund these cases. Moreover, there is a lack of experienced lawyers in this field of law,
which makes it more expensive to hire qualified lawyers for these types of cases.
Furthermore, the complexity and the financial risks of these cases often lead to only very
few lawyers willing to take on these cases.102
2.5.6. The access to remedy
The access to remedy is the fifth factor to determine the feasibility of civil
liability claims. The role of tort law is to provide the victims with compensation, meaning
99 Enneking, L.F.H. (2011), p.189-190.
100 Meeran, R. (2011), p.16.
101 Skinner, G., McCorquodale, R., & De Schutter, O. (2013), p.40.
102 Meeran, R. (2011), p.17-18
23

effective access to remedy. However, with the complexity of these trans-boundary cases,
the court might not be in position to enforce certain remedies due to the fact that the court
is dealing with events that happened outside their country and as a result, outside their
jurisdiction.103 In Europe, the type of remedies should be determined under the law of the
state where the harm happened (host state) according to the Rome II Regulation. The
courts as a result, do not always provide the victims with the right remedies.104 In the
United States, even though it might be difficult to access remedy for harms that occurred
outside the US, the courts provide victims with monetary compensatory damages.105
2.5.7. Conclusion
All the above mentioned factors demonstrate that bringing civil liability claims in
the retailers’ home state for harm that occurred in the host state is extremely difficult due
to the number of barriers: the lack or inappropriate remedies, complexity of the case,
exorbitant financial cost and the lack of other forums to bring their case. The combined
barriers make it almost unfeasible for victims to bring their trans-boundary civil liability
claims in the retailers’ home state both in the United States and in Europe.
24
Chapter 3 – Case law analysis
3.1. Introduction
Victims of human rights violations in the supply chain have been bringing their
claims in home states of the retailers. A number of barriers and obstacles have made it
difficult for these victims to obtain effective remedy and compensation. The retailer
supplier relationship is different from the parent company subsidiary relationship. There
is an indirect relationship between the retailer and its supplier, which makes it difficult to
determine whether or not they can be held accountable for the harm suffered by the
supplier’s employees in the host state. It is often difficult for the court to determine
whether the retailer has a responsibility towards the supplier’s employees.106 As a
consequence, only a few cases were brought to the court, especially in Europe where
103 Skinner, G., McCorquodale, R., & De Schutter, O. (2013), p.64.
104 Idem, p.64-65.
105 Idem, p.64-65.
106 Farrell, N. (2013), p.1519.

these trans-boundary cases are still very difficult. The generally more “litigation-friendly”
US judicial system make that plaintiffs bring suit more easily in the United
25
States.107
Two cases will be analyzed in this chapter in order to understand whether it is
feasible for victims of corporate related abuses in the supply chain to bring a civil
liability claim against the retailer. These two cases, therefore involve retailers with their
supplier. They have been pursued on the basis of tort law or the Alien Tort Claims Act in
the United States. These cases were chosen because they will show the barriers and
obstacles that the victims have to go through to access remedy when they decide to bring
their claim against the retailers in their home state. The two cases take place in the United
States, since it is easier in the United States to bring trans-boundary cases.
This chapter will not analyze any cases taking place in Europe due to the non-existence
of such cases nowadays. In Europe, it is a lot more difficult to judge these
trans-boundary issues due to the lack of legislations and laws for these cases, as
mentioned in the previous chapter. The relationship between retailers and suppliers is
complex which makes it difficult for courts to determine the distribution of responsibility
between retailers and their suppliers. There has been no tort law cases brought before
European court against European retailers by victims of human rights violations in the
supplier. Some cases where brought in Europe regarding parent company and subsidiaries
but in these cases the distribution of responsibility is easier to establish. Consequently,
this chapter will only analyze cases brought before US courts, as followed: the first case
against Wal-Mart will show how difficult it is to determine the distribution of
responsibility between the retailer and its supplier. The second case against retailers who
have factories in Saipan Island will show an effective access to remedy case.
3.2. Doe v. Wal-Mart Stores Inc.
- Facts of the case
On July 10, 2009, employees of foreign companies that sell goods to Wal-Mart
brought a claim against Wal-Mart due to their working conditions in their factories. The
107 Farrell, N. (2013), p. 1519.

employees of foreign companies that sell goods to Wal-Mart brought their claim on the
basis of the codes of conduct.
In 1992, Wal-Mart created a code of conduct for its suppliers, called “Standard
for Suppliers”, stating that its suppliers need to respect local laws regarding working
conditions, labor hours, discrimination, child labor and pay check.108 Moreover, in order
to ensure of the implementation of these Standard for Suppliers, Wal-Mart added a
paragraph regarding their right to inspect the suppliers. Nevertheless, the plaintiffs
claimed that Wal-Mart knew that the Standard for Suppliers was often violated by its
suppliers but did not take any measures against this.109 Moreover, they claimed that Wal-
Mart did not monitor its suppliers as mentioned in the Standard for Suppliers. The
plaintiffs were taught what to say when their factory was inspected, in order to have
positive reports.110 The Standard for Suppliers was even difficult to respect due to the
short deadlines and low prices.111 As a result of all these elements, the plaintiffs as third
party beneficiary, decided to bring a claim against Wal-Mart for the breach of contract
and failing to inspect the suppliers’ compliance with the Standard for Suppliers. The
plaintiffs first brought a class action in 2005 in California Superior Court but Wal-Mart
removed it to federal court due to diversity of citizenship, meaning that the plaintiffs are
non-US citizens.112 Therefore, the plaintiffs then brought their claim in federal court.
- Legal theories
Four legal theories where presented to the court in order to determine that the
Standard for Suppliers provide obligations that the plaintiffs can enforce against Wal-
Mart: (1) the plaintiffs are considered third party of the Standard for Suppliers; (2) there
is a joint employer relationship between Mal-Wart and its supplier’s employees; (3)
negligence claim: the duty to monitor its supplier was breached by Wal-Mart and
therefore, its duty to protect the supplier’s employees from bad working conditions was
also breached; (4) Wal-Mart made profit and more money because the Standard of
108 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § I.
109 Idem, § I.
110 Idem, §I.
111 Idem, § I.
112 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § I.
26

Suppliers was not respected in its supply chain.113 These four legal theories were
addressed under California law.
The court first addressed the first legal theory being the plaintiffs’ third party
beneficiary of the Standard for Suppliers. The plaintiffs stated that under the Standard for
Suppliers that Wal-Mart promised that it would make sure that the suppliers respect the
Standard for Suppliers. However, the court considered that the language used in the
Standard for Suppliers did not create a duty to monitor the suppliers but only a right to
monitor on the part of Wal-Mart.114 As a result the plaintiffs did not have the right of
action against Wal-Mart.
The second legal theory addressed by the court regards the joint employer
relationship between Wal-Mart and the plaintiffs. The court concluded that there is no
joint employer relationship between Wal-Mart and the plaintiffs. The reasoning behind
this conclusion was that the plaintiffs declared that Wal-Mart controlled day-to-day
employment. However, in reality Wal-Mart only controlled pricing, deadlines and quality
of the products, not considered as a day-to-day control by the court.115 As a result, the
court rejected the second legal theory on the joint employer relationship between Wal-
Mart and the plaintiffs.
The court proceeded to the third legal theory concerning negligence claims
brought by the plaintiffs. As stated already by the court, Wal-Mart does not owe a duty to
the Plaintiffs and Wal-Mart has no joint employer relationship with the plaintiffs.
Consequently, Wal-Mart does not have to protect its suppliers’ employees.116 The court
concluded that Wal-Mart did not owe a duty to the plaintiffs and as a result, this third
legal theory was also rejected.
The last legal theory regards the unjust enrichment of Wal-Mart thanks to the
plaintiffs’ non-respect of the Standard for Suppliers. Since the court rejected any
relationship between the plaintiffs and Wal-Mart, this fourth legal theory was also
rejected.117 The plaintiffs could bring a claim against their direct employer, meaning the
113 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § III.
114 Idem, § III.A.1.
115 Idem, § III.B.6.
116 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), §III.C.9-10.
117 Idem, § III.D.12-13.
27

factory owner for all these legal theories, however, bringing a claim against Wal-Mart is
impossible due to the indirect relationship there is between the plaintiffs and Wal-Mart.
- Outcome of the case
The court concluded that Wal-Mart had no legal obligation and duty under the
Standard for Suppliers to monitor or protect its suppliers’ employees. The relationship
between Mal-Wart and the plaintiffs is too weak for compensation; as a result, the claim
brought by the plaintiffs against Wal-Mart did not succeed.118
- Conclusion
The Doe I v. Wal-Mart Stores Inc. case shows the distribution of responsibility
between retailers in this case Wal-Mart and suppliers. In order for victims to access
remedy and get compensation, it needs to be proven that the retailer has a duty towards
the employees of its suppliers. The joint employer doctrine needs to be proved by the
court, in order to hold the retailers liable for the bad working conditions or the human
rights violations in its supply chain. In the Wal-Mart case, the plaintiffs did not manage
to prove that there was a joint employer relationship and therefore, did not get
compensation for the harm they suffered. This case is an example of the complexity of
these trans-boundary cases between retailers and suppliers.
3.3. Union Needletrades v. The Gap Inc. et al
- Facts of the case
In 1999, three separate lawsuits were filed in the United States against Saipan
garment factories and American retail apparel companies such as Gap, Wal-Mart,
Tommy Hilfiger and J.C. Penney.119 The island of Saipan is situated in the United States
Commonwealth of the Northern Marianas Islands (CNMI). Many clothing manufacturers
opened garment factories there because the label “Made in the USA” could be used.120
118 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009), § IV.
119 Business and Human Rights Resource Center. (http://www.business-humanrights.
org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/USapparelcosla
28
wsuitreSaipan)
120 Idem.

This allowed the companies to export to the United States exempt from tariff and
quotas.121 Nevertheless, the CNMI has its own immigration and labor laws.122
The case was brought by an international labor union (Union of Needletrades
Industrial and Textile Employees) and three human rights organizations (Global
Exchange, Sweatshop Watch and Asian Law Caucus) in order to expose the “how” and
“why” of the situation in the Saipan garment factories.123 The first issue brought to the
court was the false labeling. The products made in the CNMI were labeled “Made in the
U.S.A.”, for competitive advantages.124 By doing so, the companies make more profit and
avoid tariff and quotas.125 However, the factories have almost no American workers, they
are run by more than half foreign corporations and the workers are mostly coming from
China, Bangladesh and the Philippines.126 Therefore, the labels on the products are false.
The second issue present in the CNMI garment factories is the working conditions and
living conditions of the workers. The workers are underpaid, have limited to no access to
water, are served infected food and have to work up to ten or twelve hours.127 The
recruiters painted a nice picture of the American dream with well-paid jobs, safe and
clean factories and comfortable living conditions in order to recruit as much workers as
possible but once the workers were recruited the reality was not as attractive.128
Moreover, in order to be employed, the workers need to pay a fee between $2,000 and
$7,000 to the recruiting agency.129 Once they are employed, the workers cannot ask for
salary increases or participate in political or religious activities and search for another
employment.130 The conditions present in the CNMI garment factories violate working
wsuitreSaipan).
122 Idem.
123 Union of Needletrades Industrial and Textile Employees v. The Gap, No. 300474 (Cal. Sup. Ct. filed 23
Sept. 1999). (§1)
124 Idem (§2).
125 Idem (§2).
126 Idem (§3).
Sept. 1999). (§3).
Sept. 1999). (§43)
Sept. 1999).
130 Idem.
29

conditions such as working hours, health and safety conditions in the factory. 131 The
factories’ employees have their human rights violated.
- Jurisdiction
The Superior Court of the State of California County of San Francisco has to
determine whether it has jurisdiction over this case. In order to have jurisdiction, some
parties of the case need to be US citizens or US corporations. The defendants are either
US corporations with their headquarters in the United States or a non-US corporation
authorized to do business in the United States.132 The plaintiffs are the international labor
union and the human rights organizations, which are all based in the United States. As a
result, the court has jurisdiction over the case according to the California Constitution,
Article VI, §10.133
The CNMI contractors violated the Trade Act of 1930 (19 U.S.C. §1307), which
prohibits selling products in the USA that were manufactured by indentured labor.134
Moreover, the defendants are guilty of misleading claims since they state that they do not
use sweatshop conditions and help to eradicate them. If they were aware of the sweatshop
conditions in their suppliers in the CNMI, the defendants did not respect their statement
and lied to their customers.135
- Cause of actions
There were four causes of actions brought to the court. The first concerned the
enrichment of the retailers (defendants) on the workers’ expenses. The workers
underpayment and long hours allowed the defendants to make more profit either on a
deliberate way or in a negligent way.136 The second cause of actions regards the
Sept. 1999), (§3).
132 Idem (§9).
133 Idem (§8).
134 Idem (§76).
135 Idem, V. A. § 79.
Sept. 1999), §V.A. 92
30

defendants wrongful conduct. The defendants have acted contrary to public policy by
engaging in bad working conditions, acts of peonage and indentured servitude.137
The third cause of actions concerns the misleading labeling and advertising. The
defendants stated in advertisements that they do not work with suppliers that violate the
law or operate sweatshop conditions138.139 However, bad working conditions and human
rights violations were witnessed in the supply chain in the CNMI. The last cause of
actions is about the misleading claims of the defendants. The defendants stated that their
suppliers do not operate sweatshop conditions, which is misleading advertising.140 Since
the defendants knew that bad working conditions and sweatshops conditions were going
on in their supply chain.
- Outcome of the case
In 2004, after three long years of legal struggle, it was decided to close the case
with a $20 million settlement.141 Twenty-six companies and twenty-three Saipan garment
factories were involved in that decision. 142 Moreover, a code of conduct was
implemented in the agreement of the parties as well as independent monitoring and
monetary compensation.143 These decisions were made as part of the settlement.144
Nevertheless, one company did not accept the settlement. Levi Strauss argued that all the
clothing made in the CNMI garment factories complied with Levi Strauss’ code of
conduct.145
Sept. 1999), §V.B.103.
138 The US Department of Labor defined a sweatshop as a factory that violated two or more labor laws.
Sept. 1999), §V.C.109-110.
140 Idem, §V.D.113-114.
wsuitreSaipan)
142 Idem.
143 Idem.
144 Idem.
org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/USapparelcoslawsuitreSaip
31
an).

- Conclusion
This case is an example where the victims obtain remedy and compensation
through out of court settlement. As Nikki Bas, co-director of Sweatshop Watch stated, the
outcome of this case is an important victory because it shows how retailers can be
compelled by workers to be responsible for the working conditions in their supply
chains.146 However, due to out of court settlement this case did not create any legal
constraint and cannot be used as precedents for future similar cases.
32
3.4. Lesson learnt about the cases
The previously studied cases are two examples of the barriers and hurdles that
victims of corporate related abuses in the supply chain face when they bring a claim in a
home state against the retailers. As previously mentioned, both cases took place in the
United States since the complexity of these cases make it still difficult today to bring
them in Europe.
A number of elements have been learnt from these cases. First of all, about the
relationship between retailers and suppliers, which has to be established by the court in
order to be able to give an outcome on whether or not the retailers are responsible for the
bad working conditions or child labor in the supply chain. This relationship issue was
analyzed in the Wal-Mart case, where the court had to determine whether the plaintiffs
were a joint employer of Wal-Mart and that therefore, Wal-Mart had a duty towards the
employees of its supplier. The distribution of responsibility between the retailer and its
supplier is not evident since there are different degrees of relationships depending on
whether the supplier is the direct supplier of the retailer or an indirect supplier in the
supply chain (one further away in the supply chain). Moreover, whether the retailer is the
only purchaser or one of multiple purchasers creates a difference in terms of the
responsibility that the retailer has towards its supplier. If the retailer is the only purchaser
it will usually have obligation towards the employees of its supplier because it can take
measures when abuses are committed. However, this is more complex in cases of
multiple purchasers.
146 Collier, R., & Strasburg, J. (September, 2002).

Secondly, the issue of jurisdiction in these trans-boundary cases can sometimes
lead to the dismissal of the case. The fact that non-US citizens bring a claim in the United
States against a US retailers, for harm that occurred outside the United States, leaves the
court with the question of whether it has jurisdiction over the matter of the case. In the
United States, thanks to the ATS, it is easier for non-US citizens to bring their claim than
in Europe. In the Union Needletrades v. The Gap Inc. et al case, the court had jurisdiction
even though aliens where parties to the case.
Thirdly, these types of cases are often settled out of court, which provides
effective remedy and compensation for the victims of human rights violations. However,
these settlements do not create precedents and therefore, the court cannot base their
judgment on these previous similar cases.
33
Chapter 4 – Alternative legal options
4.1. The joint employer doctrine
Workers of suppliers have tried a number of strategies to hold retailers liable for
the working conditions in their supply chains. As aforementioned, the distribution of
responsibility and the relationship between retailers and their suppliers is not simple to
define. Some actions have been taken such as the implementation of voluntary codes of
conduct or the implementation of monitoring to inspect the suppliers. Furthermore, new
legislation has been proposed to try to hold retailers accountable for the violations of
human rights in their supply chain.147 These actions have led to some improvements but it
is still difficult for suppliers’ employees to hold retailers liable for their bad working
conditions.
As a result, the Fair Labor Standards Act’s (FLSA) joint employer doctrine has
been used, in the past few years in the United States, by certain lawyers on behalf of
garment employees, in order to show joint liability of suppliers and retailers.148 The joint
employer doctrine is founded on ‘judicial interpretations of the statutory and regulatory
definitions of “employee”, “employ” and “employer”’.149 These regulatory definitions
were characterized by the FLSA, as follows: ‘“employee” as “any individual who is
147 Lung, S. (2003), p.311-313.
148 Idem, p. 311-313.
149 Idem, p.313-314.

employed by an employer”150 ; “employ” as “to suffer or permit to work”151 and
“employer” as “person acting directly or indirectly in the interest of an employer in
relation to an employee”’152.
The joint employer doctrine cannot be applied in all cases. There is a joint
employer relationship if the work of the workers benefits both employers (retailers and
suppliers). Moreover, the joint employer relationship exists if there is a link between the
two entities, if the workers are working directly or indirectly for the interest of the
employer (here for the retailer as an indirect employer) and if there is direct or indirect
share control over the workers.153 The FLSA does not give specific guidance on how to
apply and interpret this joint employer doctrine. As a result, the court has the
responsibility to define the boundaries for the joint employer doctrine and decide whether
there is a joint employer relationship.154 Does this joint employer doctrine allow victims
of human rights violations in the supply chains to bring more easily a civil liability claim
against the retailers in their home country?
In the case of the retailer and supplier relationship, the joint employer doctrine
can be applied if it can be demonstrated that the suppliers’ employees are indirectly
working for the retailers and that their work is in the interest of the retailers. Due to the
limited guidance on whether or not there is a joint employer relationship and the broad
definition of each of the three terms, the court established a test in order to decide
whether there is such a joint employer relationship in a specific case.155 The test is based
on an “economic reality” test.156 This test allows the court to define whether the workers
are financially dependent of the supposed employer.157 Therefore, if the suppliers are
financially dependent on the retailers, there is a joint employer relationship.
The courts, however, still struggle with framing the factors that need to be used
for the “economic reality” test. The defendants and the victims do not want to use the
same factors, since the defendants are seeking to avoid the joint employer relationship
150 29 United States Code. § 203(e). Lung, S. (2003), p.313-314.
151 29 United States Code § 203(g). Lung, S. (2003), p.313-314.
152 29 United States Code § 203(d). Lung, S. (2003), p.313-314.
153 Lung, S. (2003), p.313-314
154 Idem, p.313-314.
155 Deines, B. (2005), p.13-14. Lung, S. (2003), p. 316-319.
156 Idem, p. 13-16.
157 Burch, R.J. (2002), p.405-406.
34

whereas the plaintiffs are seeking to demonstrate the joint employer relationship. The
defendants prefer to use the four factors from the Bonnette v. California Health &
Welfare Agency case: (1) power to recruit and to lay off (2) the employer supervises the
work of the employees; (3) payment is chosen by the employer and (4) records of the
employees are kept by the employer.158 The plaintiffs, on the other hands, prefer the five
factors from Brock v. Superior Care, Inc. case: (1) how much control does the employer
have over the workers; (2) do the workers have any occasion for profit or loss; (3) what
initiative do the workers need to perform their work; (4) how long does the working
relationship last and (5) to what extent is the work an integral part of the employer’s
business.159 The non-defined factors for the “economic reality” test leave the court with
either using the factors from the Bonnette v. California Health & Welfare Agency case,
which favor the defendant or the factors of the Brock case, which favor the plaintiffs.
The joint employer doctrine when established by the court can help victims of
human rights violations in the supply chain to bring their case and hold retailers liable for
the harm they suffered. Nevertheless, the court does not always prove the joint employer
relationship as for example in the Wal-Mart case, where the court dismissed the case due
to the lack of joint employer relationship and therefore, Wal-Mart did not owe any duty
towards the employees of its suppliers.160 On the other hand, if the court proves the joint
employer relationship, the retailer will be held accountable for the employees of its
suppliers and therefore, will owe a duty to protect its employees. In June, the National
Labor Relations Board said that McDonalds, the world’s biggest fast-food company,
could be named a joint employer for the workers of its franchise-owned restaurants.161
This would mean that McDonalds could be held liable for the working conditions in its
franchised restaurants.162
The creation of the joint employer doctrine is a real significant creation since
most cases about retailers and suppliers are dismissed in court because the distribution of
responsibility and the relationship between the two is difficult to define. With this
158 Burch, R.J. (2002),, p. 407-408. This test has been criticized as being biased against a finding of joint
employment outside of certain limited situations.
159 Idem, p.408-409.
160 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 680 (9th Cir. 2009). § IV.
161 Choi, C. (July 30, 2014).
162 Idem.
35

doctrine and the “economic reality” tests, the court will have a number of elements to
base its judgment and to determine whether the retailers are responsible for the abuses
committed by their suppliers. Nevertheless, it is today still quite difficult to define the
joint employer relationship since the factors of the “economic reality” test are still not
clearly defined. With the establishment of these factors, the employees of the suppliers
will be able to bring their claim against the retailers and create awareness on the level of
the retailers so as to change the working conditions in their supply chain.
4.2. Claims under ‘deceptive commercial practices’
It is today difficult to hold companies liable for the violation of human rights.
Victims of these corporate related abuses are often left with few judicial resorts to bring
their claim and access effective remedy. As aforementioned, it is even more difficult to
hold a company accountable for abuses committed by their subsidiaries or suppliers. The
distribution of responsibility between the company and its subsidiaries or suppliers is not
always clear. Moreover, the lack of effective legislation and laws, especially in
developing countries where the suppliers are often domiciled, make it a challenge for the
victims to access justice and access remedy. Due to these barriers and obstacles to hold
companies accountable for their actions, some organizations have found other grounds to
legally sanction multinational companies. These organizations such as Sherpa, Action
Aid and Clean Clothes Campaign (CCC), bring claims against multinational corporations
under ‘deceptive commercial practices’. They declared in a joint press release: ‘the
launch of this investigation could for the first time in Europe, explore the legal
ramifications of the gap between the ethical communication of some firms and the actual
practices that they tolerate and from which they benefit’.163
These three organizations brought a claim against the French international retail
group Auchan. Auchan’s label In Extenso was found in the rubble of the Rana Plaza
building and therefore, its ethical claims were challenged.164 The limitation of French law
on corporate responsibility left Sherpa, Action Aid and CCC no other choice than to sue
36
163 Petitjean, O. (July 4, 2014).
164 Idem.

Auchan for ‘deceptive commercial practices’.165 The public prosecutor of Lille started the
investigation one year after the collapse of the Rana Plaza building, to investigate
whether Auchan misinformed its consumer concerning the labor conditions in its supply
chain. Sherpa (a French organization) also brought a similar case against Samsung, who
used their code of conduct as an advertising method, but without respecting it in their
supply chain.166 These two legal actions are still ongoing and therefore, the court has not
yet given an outcome. These sanctions and legal claims do not allow victims to access
remedies and get compensation but it allows organizations to legally sanction these
multinational corporations and therefore, tackle the issue of human rights and businesses
in another legal way.
In 1998, a case was filed by Kasky against Nike regarding unfair and deceptive
practices under California’s Unfair Competition Law and False Advertising Law.167 The
bad working conditions in Nike’s suppliers were reported in the news. Nike denied these
accusations in press releases and public statements and Kasky claimed that these
statements contained false information.168 Nike stated that it had freedom of speech to
make such statements and the court agreed and dismissed the case.169 Kasky appealed
that decision of the court and also appealed the decision of the California Court of
Appeals. The California Supreme Court reversed the lower court’s ruling and Nike
appealed. The case went to the United States Supreme Court but was dismissed. As a
result, in 2003, instead of wasting more money in lawsuits, Nike and Kasky decided to
settle the case out of court for $1.5 million and improve the working conditions in the
supply chain by implementing auditing programs and by financing educational
programs.170 This sum was paid to the ‘Fair Labor Association, an American organization
bringing together companies, universities, consumer associations and NGOs’ for them to
assess the working conditions in the supply chain.171
165 Petitjean, O. (July 4, 2014).
166 Idem.
167 Business and Human Rights Resource Center, see Kasky v. Nike. (http://business-humanrights.
org/en/nike-lawsuit-kasky-v-nike-re-denial-of-labour-abuses-0#c9325)
37
168 Idem.
169 Idem.
170 Queinnec, Y. (2007), p. 31-32.
171 Idem, p.31

The Kasky v. Nike case was settled out of court ten years before Sherpa, Clean
Clothes Campaign and Action Aid decided to bring claims against multinational
companies for their deceptive commercial practices. A decade later, these organizations
are suing companies under this legal basis in order to sanction these companies that use
their code of conduct for their good image and reputation when in reality, workers in their
supply chain are working long hours for low pays with non-humane conditions. These
cases are today in Europe a way to sanction companies and tackle the problem of
business and human rights. However, these legal actions on the basis of deceptive
commercial practices do not provide access to remedy for the victims of these corporate
related abuses but help create awareness in today’s society and sanction companies for
their misleading advertisement. Cases such as Nike in the United States or Auchan in
France have made companies aware of the consequences of such legal action. This
awareness led Nike, in 2005, to publish a report with the list and locations of its
production workshops.172 As a result, certain companies now ask organizations such as
Sherpa, Clean Clothes Campaign or Action Aid to help them avoid these legal costs.173
38
Chapter 5 – Conclusion
Victims of corporate related abuses in developing countries bring their cases
before the European Union Member States and United States home courts of their
retailers, so as to obtain effective remedy and compensation. The corrupt legal systems,
in their developing host countries, as well as the insolvency of the local employers, incite
these victims to file their claims against the retailers in their home states.
In the wake of globalization, human rights and environmental abuses happen all
over the world. However, the legal frame of all countries has not evolved globally at the
same time. Therefore it is extremely difficult for victims of corporate related abuses to
hold their retailers accountable, through trans-boundary cases.
Trans-boundary civil claims against European retailers in their home courts,
would not lead to effective remedy and compensation, due to the fact that the relationship
between retailers and suppliers is still a legal grey area. The European legal infrastructure
172 Queinnec, Y. (2007), p. 31-32.
173 Idem, p. 31-32.

presently does not provide victims of corporate abuse in the supply chain with viable
legal routes to obtain the retailers’ accountability for human rights abuses.
Even under the more favorable United States legal system, it is extremely difficult
for developing-host-country victims to hold retailers liable and to obtain redress. The
trans-boundary civil claims can be brought either under United States common tort law or
under ATS (Alien Tort Statute). The outcome of the Kiobel v. Royal Dutch Petroleum
Co. case in 2013, in the United States Supreme Court, creates a high uncertainty as to the
possibility to hold retailers accountable for corporate related abuses in host countries
under ATS and as such make it practically impossible to obtain effective remedy and
compensation. However, under United States common tort law it is more feasible for
developing-host-country victims to obtain redress, in spite of numerous legal barriers to
overcome.
Since the retailers’ Codes of Conduct and Charts (non-binding soft law) are not
mandatory for the supply chain companies in host countries and in the absence of serious
legal constraints (binding hard law) forcing all companies to prevent all human rights and
environmental risks, the victims of corporate related abuse will continue to face complex
legal barriers and remain uncertain as to obtaining redress.
In order for victims, who suffered harm in developing countries, to be able to file
civil liability claims under better conditions, in the Western courts, Europe and the
United States would have to rectify the existing gap in legal protection by creating more
open procedural requirements. It remains to be seen, whether both European and United
States policy makers are willing to develop a less hostile climate for human rights victims
to file their claims against retailers in the home countries.
In the absence of more open and viable legal routes for developing-host-country
victims, improvement can presently only come from organizations as Sherpa, Clean
Clothes Campaign and Action Aid, suing retailers (multinational companies in general)
on different grounds, such as deceptive commercial practices. Through these alternative
cases, the light is shed on the terrible human and civil rights abuses of these companies,
resulting in people’s awareness on these cases and therefore maybe leading to tangible
improvements in the working conditions in the supply chains in developing countries.
In the United States, the alternative strategy to hold retailers liable for corporate
39

related abuse under the joint employer doctrine has proven to be complex in cases dealing
with a retailer supplier relationship.
As long as multinational corporations and retailers do not resolve to taking drastic
and binding Corporate Social Responsibility initiatives, forcing all companies in the
supply chain to prevent human rights and environmental risks, human rights violations
will continue to occur and victims of corporate related abuses will continue to bring their
claims before home state courts against retailers. This situation will most probably
provoke further discussions on the subject and possibly lead to changes in the global legal
frameworks.
40

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