Private Law Remedies, Human Rights, and Supply Contracts

Private Law Remedies, Human Rights, and Supply Contracts

68 Am. U. L. Rev. 1781 (2019).

* Professor of Law, St. Thomas University School of Law. The Author wishes to thank research assistants Jose De la Cruz, Renato Da Costa Almeida, Heidy Gonzalez, and Jikky Thankachan of St. Thomas University School of Law for their valuable work on this project. The Author also wishes to thank Professor David Snyder (American University Washington College of Law) and Susan Maslow (Antheil Maslow & Macminn, LLP) for their leadership of the ABA Working Group and Christopher Johnson (Center for Justice, Rights & Dignity), Professor Sarah Dadush (Rutgers Law School), and Professor Stephen Sepinuck (Gonzaga University School of Law) for their comments on my proposals in this Article.

Implementation of company human rights policies through the supply chain necessarily includes access to the full range of contractual remedies. Many corporations already have corporate human rights policies respecting a wide number of human rights that might be violated in the supply chain, yet having corporate policy is not akin to action. To the extent commercial buyers implement corporate policies in supply chain contracts the contractual obligations are answerable for breach. The Uniform Commercial Code and the UN Convention for the International Sale of Goods provide access to contractual remedies using a market-based remedial framework that would assist in curbing breaches arising from the use of forced or slave labor in international supply chains. This Article provides an overview and analysis of available remedies for breach of a corporate human rights policy implemented in the supply chain. Buyers have access to these remedies either through default or as specifically contracted for remedies, subject to the general notions disfavoring penal damages. The Model Contract Clauses from the American Bar Association’s Working Group to Draft Human Rights Protections in International Supply Contracts operate to provide such alternate remedies to buyers implementing human rights policies as contractual supply chain obligations that operate consistently with the existing legal frameworks.

Introduction

Implementation of company human rights policies (“CHRPs”) through supply contracts necessitates access to remedies. The fulfillment of contractual expectations through remedies is the very foundation of contract law,1John Edward Murray, Jr., Murray on Contracts § 118 (5th ed. 2011). including transactions subject to Article 2 of the Uniform Commercial Code (“UCC”)and the United Nations (UN) Convention for the International Sale of Goods (“CISG”).2See generally U.N. Convention on Contracts for the International Sale of Goods, art. 74, Apr. 11, 1980, 1489 U.N.T.S. 3 [hereinafter CISG]. This Article will refer to provisions of the UCC and the CISG., but acknowledges that contracting parties may opt-out of the CISG. Nevertheless, this Article will cite to key provisions of the CISG, particularly where the CISG provisions differ from the UCC. The flexibility of remedies available under Article 2 permits its application in an “infinite” variety of business transactions, customs, and practices, which would presumably include obligations arising from human rights policies included as part of the contractual obligations in a supply contract.3See Grant Gilmore, On the Difficulties of Codifying Commercial Law, 57 Yale L.J. 1341, 1341 (1948) (stating that draftsmen of general commercial legislation must consider an “infinite variety of business customs and practices” and that the then-newly proposed UCC covered a variety of different commercial practices).

Despite the work of the UN and the proliferation of CHRPs, there have been continuing instances of human rights concerns in supply contracts. Ongoing problems have led major buyers, including H&M, Walmart, and Gap, to pledge improvement in safety and conditions of workers abroad.4Rachel Abrams, Retailers like H&M and Walmart Fall Short of Pledges to Overseas Workers, N.Y. Times (May 31, 2016), https://www.nytimes.com/2016/05/31/business/international/top-retailers-fall-short-of-commitments-to-overseas-workers.html. The garment industry has not been alone in struggling with human rights concerns abroad; there are also reports of slavery in the fishing industry,5E.g., Ian Urbina, ‘Sea Slaves’: The Human Misery that Feeds Pets and Livestock, N.Y. Times (July 27, 2015), https://www.nytimes.com/2015/07/27/world/outlaw-ocean-thailand-fishing-sea-slaves-pets.html (noting that migrants from Cambodia and Myanmar are “sea slaves” on floating Thai labor camps). child slave labor in the chocolate industry,6See, e.g., Brent Kendall, Supreme Court Denies Nestle, Cargill, ADM Appeal in Slave Labor Case, Wall St. J. (Jan. 11, 2016, 1:51 PM), https://www.wsj.com/articles/supreme-court-denies-nestle-cargill-adm-appeal-in-slave-labor-case-1452526492 (documenting a class-action lawsuit regarding forced child slaves who worked on cocoa fields in the Ivory Coast). armed groups benefitting from minerals,7Joseph Ataman, EU Agrees on Measures Regulating Conflict Minerals, Wall St. J. (June 16, 2016, 2:51 PM), https://www.wsj.com/articles/eu-agrees-on-measures-regulating-conflict-minerals-1466103065. and concerns of child labor in tobacco farming8Alexandra Hall, Working in Tobacco Fields Can Make Kids Sick. But They Still Need the Money, Wash. Post (Oct. 6, 2016), https://www.washingtonpost.com/lifestyle/magazine/working-in-tobacco-fields-can-make-kids-sick-but-they-still-need-the-money/2016/10/05/fb0892e8-754b-11e6-8149-b8d05321db62. that form just part of a long list of continuing and recurring concerns.9See generally Rothna Begum, “I Was Sold”: Abuse and Exploitation of Migrant Domestic Workers in Oman, Hum. Rts. Watch (2016), https://www.hrw.org/sites/ default/files/report_pdf/oman0716web.pdf; Aruna Kashyap, “Work Faster or Get Out”: Labor Rights Abuses in Cambodia’s Garment Industry, Hum. Rts. Watch (2015), https://www.hrw.org/report/2015/03/11/work-faster-or-get-out/labor-rights-abuses-cambodias-garment-industry; see also ABA, ABA Model Business and Supplier Policies on Labor Trafficking and Child Labor (2014), https://www.americanbar.org/ content/dam/aba/administrative/business_law/aba_model_policies.pdf [hereinafter ABA Model Policies]. Some have taken the position that an international convention to combat concerns of human rights abuses in supply contracts is needed.10Global Treaty ‘Only Realistic Way’ to Stop Supply Chain Abuse: Rights Group, Reuters (May 30, 2016, 10:51 PM), https://www.reuters.com/article/us-labour-regulations-rights/global-treaty-only-realistic-way-to-stop-supply-chain-abuse-rights-gro up-idUSKCN0YM06P.

While there has been consideration of public interventions to combat human rights abuses, there has been little guidance on the right approach to private action and even less guidance on private remedies for human rights abuses, particularly with respect to contracting party behavior that conflicts with a buyer’s CHRP incorporated into supply contracts. More specifically, a buyer is generally entitled to a recovery that places it in the position it would have been if full performance had occurred, so long as the recovery is not penal in nature.11U.C.C. § 1-305 (Am. Law Inst. & Unif. Law Comm’n 2011); see also CISG, supra note 3, art. 74 (stating that damages “consist of a sum equal to the loss, including loss of profit”). Yet, it might be questioned whether enforcement of CHRPs mandated in supply contracts can, or even should, be quantified by this type of measure. Tension exists between the remedial object of assuring the non-breaching buyer the “benefit of the bargain” through access to contractual remedies for human rights violations in the supply chain and those who might advocate for greater responsibility for the buyer itself when human rights violations occur in the supply chain.12See generally Omri Ben-Shahar & Ariel Porat, The Restoration Remedy in Private Law, 118 Colum. L. Rev. 1901, 1905–06 (2018) (arguing in favor of a “restoration remedy” to compensate underlying emotional harms); Sarah Dadush, Identity Harm, 89 U. Colo. L. Rev. 863, 867–68 (2018) [hereinafter Dadush, Identity Harm] (arguing in favor of a greater power for consumers to pursue actions for identify harm to aid in corporate accountability); Sarah Dadush, The Law of Identity Harm, 96 Wash. U. L. Rev. 803, 804 (2019) [hereinafter Dadush, The Law of Identity Harm] (arguing that there is a deficit in private law recourse for harm suffered by those who would not ordinarily have access to a remedy).

An example of the relationships (illustrated in Figure 1 below) and the impact private actors can have on the protection of human rights is in order.13See Philip Alston & J.H.H. Weiler, An ‘Ever Closer Union’ in Need of a Human Rights Policy, 9 Eur. J. Int’l L. 658, 720 (1998) (explaining the effect of privatization and deregulation on the importance of corporate human rights policies); William Bradford, Beyond Good and Evil: The Commensurability of Corporate Profits and Human Rights, 26 Notre Dame J.L., Ethics & Pub. Pol’y 141, 156–57 (2012) (noting most major corporations have codes of conduct); David Kinley & Junko Tadaki, From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law, 44 Va. J. Int’l L. 931, 953 (2004) (delineating the proliferation of corporate codes of conduct). Suppose a commercial seller and buyer make a long-term supply contract for the purchase of soccer balls at $6 per ball. The buyer, located in the United States, has a CHRP as a foundation for all supplier agreements, to which all sellers and their suppliers must adhere, that includes standards for leadership and prohibits labor by those under the age of sixteen.14See, e.g., Nike’s Commitment to Human Rights & High Labor Compliance Standards, Nike, https://sustainability.nike.com/human-rights (last visited June 1, 2019) (“Nike specifically and directly forbids the use of child labor in facilities contracted to make Nike products.”); see also Doug Cahn, Human Rights, Soccer Balls, and Better Business Practices, Carnegie Council (June 5, 1997), https://www.carnegiecouncil.org/ publications/archive/dialogue/1_09/articles/569 (discussing standards Reebok set when entering the soccer ball market). The buyer later discovers that the seller’s supplier, located in Pakistan, is employing ball stitchers who are under the age of sixteen years old and as young as ten years old. The buyer faces unfavorable news coverage, lost sales of soccer balls and other sporting equipment, and damage to its reputation due to the use of child labor in its supply chain.15See generally Dadush, The Law of Identity Harm, supra note 13, at 869–70 (discussing consumer lawsuits brought against companies purportedly undertaking human rights protections and arguing that misleading statements to such effect may be the basis for later consumer claims). While the supplier may assert that views are different about the age of workers locally and the difficulty finding labor near the factory site, the buyer, if the child labor problem remains unresolved, may want to cancel the contract and claim damages.

Figure 1: Relationship of Supply Chain Participants