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How commercial law and employment law can conflict

May the Netherlands deny access to products manufactured under poor working conditions? And can a manufacturer bring a case against a country that increases its minimum wage? PhD candidate Ruben Zandvliet examined the legal and ethical issues involved in international commercial law, investment law and employment law. PhD defence 21 February.

The collapse of the Rana Plaza building in Bangladesh in 2013, in which 1,134 textile workers lost their lives, has become the symbol for the at times inhuman working conditions in today's globalising world economy. 'Work is a production factor, so if work becomes more expensive, a manufacturer can decide to shift production  elsewhere,' comments legal expert Ruben Zandvliet. ‘This is why a lot of our clothes today come from Bangladesh rather than from Tilburg.' This phenomenom is facilitated by economic law: the rules protecting international trade and foreign investment.

Fair international competition

International investment law protects companies that invest in another country - for example against expropriation and 'unfair' treatment. In international commercial law, the main concern is the goods themselves. Countries lower import duties to make import and export cheaper. Trade and investment generate economic growth, according to economic theory, and should therefore be encouraged. But the legal  agreements on these issues also impact how work is regulated, Zandvliet concludes, both in a positive and a negative sense. 

Employment law versus investment law

Take, for example, a Dutch company that has goods made in another country, and that country raises the minimum wage to improve its workers' employment situation. Production at that company will become more expensive. On the gounds of investment law, the company could say: this is a form of unfair treatment, so we are not going to agree to this wage increase. Zandvliet: ‘Only one such case has been described. The Veolia company brought a case against the Egyptian state because it raised the minimum wage, which had consequences for Veolia's activities in Egypt. According to Egyptian government officials, the country ultimately won the case. But the judgement and other documents are not in the public domain, so we can only guess at how the tribunal reached its decision.'  

Protecting trade

Another aspect is that trade could be used to enforce improvements in working conditions. Could the Netherlands, for example, refuse to accept goods produced under poor working conditions?  International commercial law - contained in trade treaties between countries - protects manufacturers against this. 'Commercial law does offer some scope to deviate from these rules, to protect public interests. The European Union, for example, bans the import of seal fur. This raises the question among legal experts of why seal fur is banned, but not child labour,' Zandvliet says. 'The discussion has now shifted from refusing individual products to expanding trade treaties by adding clauses about working conditions to protect or improve the position of workers. The treaties say, for example, that the countries may not worsen their employment law.' 

Improving human rights?

'More and more of these kinds of clauses are being introduced, Zandvliet concludes, 'but they're difficult to uphold. Countries are still reluctant to call their trading partners to account for upholding the conditions of employment law.' What also surprised him was the intention behind these clauses. 'It seems like a moral step, a striving for better human rights, but if you carefully analyse the use of language in these clauses, the real aim is fair competition. Infringement of the clause only comes into play if there is an economic impact.' Zandvliet explains. 'But my investigations have shown that the  real emphasis is on the economic aspect, and this is papered over.' 

Better trade agreements

On the basis of the agreements and rules of the World Trade Organisation and the International Labour Organisation and bilateral trade and investment treaties - such as CETA, the treaty between Canada and the European Union - Zandvliet tried as far as possible to identify the areas of contention between commercial law, investment law and employment law. ‘A lot of bilateral trade treaties are concluded. My research can help officials throughout the world to improve these treaties, so that they really do contribute to fair trade and better protection of workers. Not only that, they can help in interpreting treaties and settling disputes between countries.' 

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