By: Kristoffer Burck, Junior Research Associate, PILPG-NL
With the advent of globalization, the geographical scope of supply chains has greatly increased. A final product is made up from components that have traveled through various jurisdictions and that have been processed by different legal entities. This creates complicated legal questions, especially in cases of human rights violations along the supply chain. For instance: Who is responsible for these violations – the sub-contractor running the factory, or the retailer who does nothing to ensure compliance with human rights standards? Which jurisdiction is applicable – the jurisdiction of the state where the factory is located or the jurisdiction of the state where the product is sold? And which countries' laws should be applied? A German regional court was faced with these questions for the first time in 2019, when victims of a fire in a textile factory in Pakistan submitted a civil lawsuit against a German clothing company.
Background of the Case
In September 2012, a fire in a textile factory in Karachi (Pakistan) killed 260 people and left 32 injured. According to an investigation by Forensic Architecture, the majority of these deaths and injuries could have been prevented, had the factory adhered to basic safety standards. A single retailer, namely the German clothing discounter KiK, bought around 70 percent of the products from the factory. As a result, critics alleged that Kik held partial responsibility as it could have effectively demanded adherence to basic safety standards. Following years of negotiations between KiK and victims´ rights organizations, the German retailer agreed to pay compensation amounting to around six million US dollars to the victims, but refused to admit any wrongdoing. During the negotiation process, KiK pledged to waive its claims to statute of limitations regulations (the time limit of how long after the damage a lawsuit can be brought) in future lawsuits. A number of families found this offer inacceptable and decided to claim damages in a civil case in German courts. In 2016, four victim representatives - German law does not allow class action lawsuits - with the support of two NGOs, filed a civil lawsuit at the regional court of Dortmund.
Foreign Law Before Domestic Courts
But why should a German court have jurisdiction in a case of damages occurring in Pakistan? Article 63 (1) of Brussels 1 Regulation, in connection with paragraphs 12 and 17 of the German Code of Civil Procedure, allow for proceedings of international civil cases in the courts of the home state of the defendant. According to Article 4 (1) of Rome 2 Regulation, the applicable law in these cases shall be the law of the state where the damages occurred. Thus, in this case, the German court applied Pakistani law to evaluate KiK´s liability for human rights violations by its Pakistani contractor.
Statute of Limitations
The applicable Pakistani common law holds that personal injury cases (called tort cases) involving bodily harm are time barred to two years after the injury occured. The court further concluded that under Pakistani law the parties cannot voluntarily make an exemption to this time limitation (English discussion of this argument here). The court also dismissed the argument that both sides agreed to be partially bound to legal obligations of the law of their choice, following Article 14 (1) (a) of Rome 2 Regulation. Lastly the court rejected the plaintiffs´claims that the Pakistani statute of limitations is incompatible with the ordre public (the fundamental legal principles of a state) of German law. The plaintiffs had argued that pursuant to Article 26 of the Rome 2 Regulation, the Pakistani regulation would negate effective legal protection (a core principle of the German legal system) in complex cases with an international dimension. Ultimately, the court dismissed the case on procedural grounds and thereby did not provide a decision on the merits.
Proposed Supply Chain Legislation
Even though the KiK case did not provide a precedent on liability for human rights violations upstream the supply chain, it did provide an illustrative point for proponents of a German domestic supply chain law. These demands are directly linked to the unsatisfying dismissal of the KiK case on procedural grounds and the absence of a decision on the merits. The advocacy seems to fall on fertile ground as the position of key federal ministries seems to have changed from calling for voluntary industry commitments to efforts to pass concrete legislation. While the details remain up to negotiations, civil society campaigns use the KiK case to underline a key demand: the proposed law should make German standards applicable to damage claims from upstream the supply chain by designing the law as a mandatory rule (“Eingriffsnorm”).
Conclusion
The KiK case, by publicly shining a light on the problems arising from missing legal certainty in “globalized” tort cases, has set the pretext for future national legislation in Germany. By doing so, Germany might follow legislation in France, the UK and the Netherlands (English discussion of the law here), all addressing certain aspects of global supply chains. However, a comparison of these laws indicates a patchwork of different objectives and approaches, maintaining disparity within the EU. Whereas the German law can probably contribute to legal certainty in Germany, EU solutions are necessary to ensure harmonious protection of human rights within global supply chains.