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16 Jun 2015

Miriam Saage-Maaß, European Center for Constitutional and Human Rights

Forging new legal ground: Why families & survivors of the Karachi factory fire could spell the end of voluntary corporate responsibility

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This blog is also available in German.

The devastating fires in textile factories in Bangladesh and Pakistan in autumn 2012 and the Rana Plaza disaster in spring 2013 made one thing clear: the true price of global production is being paid by the factory workers in countries like Bangladesh, China or Cambodia. Many western companies sourcing products from these factories reject any legal responsibility. At most they refer to a “moral responsibility”. These companies have claimed that complex supply chains made it impossible for them to monitor working conditions in all their suppliers’ factories.

It’s true: global supply chains, the product of a neoliberal production system built on free trade policies, are highly complex. Companies at the end of these chains have very little economic power as western companies enter into short-lived, flexible contractual dealings with factories, which allows them to refute any legal liability in cases of human rights abuses in the production process. While it can at times be difficult to establish that the requisite legal influence exists under these contractual arrangements, studies show that the buyer firms do exert economic power over the supplier companies and their working conditions.

Calls for binding rules

In response to this situation, a number of civil society actors are calling for law reform in Germany and the EU, with the aim of clarifying the issue of liability for human rights violations at production locations. Specific reform proposals are already being debated in Switzerland while the French parliament recently passed a law on the issue. These efforts all face a serious challenge: how to introduce binding rules to a system that is inherently complex and unaccountable.

As these debates continue across Europe, victims of human and labour rights violations are unwilling to rely on the ostensible generosity of the companies or the legal reform efforts still underway in Germany and the EU. They are already engaged in efforts to seek justice before German and European courts. A current example is the claim taken against clothing discounter KiK by one survivor and three relatives of victims of the factory fire in Pakistan. This case reveals the emancipatory potential of legal proceedings, and shows that multiple legal actions in different countries can complement each other.

The Ali Enterprises fire disaster and victims’ search for legal remedy

On 11 September 2012 a fire broke out at the Ali Enterprises textile factory in Baldia Town in Karachi. 260 workers died and 32 were injured, some seriously. They were not able to exit the burning building in time. Emergency exits were blocked and the iron bars on the windows could not be opened.[1] According to the company’s own figures, German clothing discounter KiK has been in a client relationship with the factory since 2007, and in 2011 bought at least 70% of the goods produced there.

Over the past two years, the victims of the fire disaster and their relatives have formed the Baldia Factory Fire Affectees Association. This group encompasses over 150 families. They meet regularly to provide support to one another, including financial support, as many families lost their main breadwinner in the fire. The members organise demonstrations and try to inform other workers about issues of fire safety and labour rights. They are supported in their work by the Pakistani trade union NTUF (National Trade Union Federation).

But the Baldia Factory Fire Affectees Association seeks for accountability. Several of the families are represented in local legal proceedings against Pakistani authorities, in which the Pakistani government is asked to pay its share of compensation, as well as in criminal proceedings against the factory owners. At the same time victims are calling for justice from the European companies involved, KiK and the Italian certification firm RINA.

Shortly after the catastrophe, KiK paid out one million US dollars as emergency relief for the survivors and relatives. This money was paid to victims and their families through an independent commission at the High Court of Sindh in Pakistan. Labour rights organization PILER has been involved in negotiations with KiK since December 2012 on long-term compensation for all affected parties. Talks were delayed until mid and late 2014, and the victims found the offer unacceptable. At this point, the organizations discontinued the negotiations. At a meeting of over 190 family members and survivors in February 2015, the families of the Baldia Factory Fire Affectees Association decided they would not accept KiK’s offer and would therefore proceed with a lawsuit against KiK.

This decision was not taken lightly. For more than a year the group held discussions on the potential and the risks of legal action against KiK. Guidance during this discussion process was provided by the European Center for Constitutional and Human Rights (ECCHR) and by Medico International, among others. ECCHR also intervened in the proceedings ongoing in Pakistan by submitting an expert legal brief, setting out the options for taking legal action against European firms KiK and RINA, and drafting the claim in cooperation with an independent attorney.

Following the collapse of the negotiations with KiK, the Baldia Factory Fire Affectees Association selected the potential claimants from their own member ranks, because German Law does not allow the equivalent of class action lawsuits. These were chosen because the group saw them as capable of persevering through lengthy proceedings and acting not only in their own interest but also in the interest of the group as a whole.

The legal action against KiK is aimed in part at securing adequate compensation. But for the victims, it’s also a question of justice. They want KiK to acknowledge that it bears legal responsibility for the catastrophe. The claimants hope that by taking the case they can persuade KiK and other companies to take fire safety in supplier companies more seriously. They aim to ensure that a disaster like this one never happens again.

Outlook: What can be achieved by the claim against KiK?

Over the coming months the Court will make a decision on the admissibility of the claim. After that, the parties will have the opportunity to present further written submissions to the Court. It will be winter 2015/2016, at the earliest, before the Court begins the first oral proceedings which the claimants can personally attend. It remains to be seen whether the Regional Court of Dortmund (Landgericht Dortmund) will accept the arguments of the claimants.

The claim is forging new legal ground by attempting to enforce social and economic human rights through the national legal system. What’s clear is that the German legal system is not set up for this kind of victim-led claim. Even the fact that only four of the more than 250 affected families are able to take a claim – and even then only with the help of international organizations and attorneys – shows that Germany fails to offer any effective legal recourse for those affected by human rights violations.

Procedural costs present a major obstacle; because the case is a novel one, the cost risks are high. This is compounded by the fact that German law does not allow victims to take group action, which would cap the total costs. As there was never any possibility of the victims taking a group claim against KiK, the ability of the group to self-organise and select a handful of “representative” claimants was a prerequisite for their access to the courts. There is also the substantive legal question, yet to be resolved, as to the criteria under which a client company is liable for its suppliers. Each of these points centred on the enforceability of economic and social rights, will need to be addressed to various degrees in the course of these proceedings.

What has the claim achieved to date? Victims of the Ali Enterprises fire have already shown that merely voluntary corporate action is a thing of the past. They expect the Regional Court of Dortmund to comprehensively address their plights and KiK’s legal responsibility for the harm suffered. The claim sends a clear message to western companies: employees will no longer be placated by corporate handouts. This was also well established by the compensation claims taken before British courts by workers who suffered from asbestos exposure in South Africa[2]. If the four families are successful in their claim, more victims of the Ali Enterprises fire will commence court action against KiK.

[1] Three official reports from different authorities in Pakistan came to the conclusion shortly after the disaster that short circuits or other fire safety faults had been the cause of the fire. In February 2015 records of the interrogation of a suspected hitman emerged, in the course of which he claimed to have learned through hearsay that the fire was an act of arson connected to the extortion of protection money.

[2]Connelly v. R.T.Z. Corporation Plc.[1998] A.C. 854; Lubbe v. Cape plc [2000] 4 All ER 268; Chandler v. Cape plc [2012] EWCA Civ 525.