International Law and Economics

Series editors Stefan Voigt, Germany Anne van Aaken, Switzerland Andrew T. Guzman, USA Stefan Oeter, Germany Joel P. Trachtman, USA Naigen Zhang, China More information about this series at http://www.springer.com/series/13428 Felix Hadwiger

Contracting International Employee Participation Global Framework Agreements Felix Hadwiger Institute of Law & Economics University of Hamburg Hamburg, Germany

ISSN 2364-1851 ISSN 2364-186X (electronic) International Law and Economics ISBN 978-3-319-71098-3 ISBN 978-3-319-71099-0 (eBook) https://doi.org/10.1007/978-3-319-71099-0

Library of Congress Control Number: 2017960766

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This Springer imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Acknowledgements

I am very grateful to my family and friends who helped me during the course of this research. To name only a few of them: Fanny E. Schories, Farzaneh Badiei, Mariia Parubets, Sarah Lee, Marek Endrich, Melina Ba¨rwalde and Enrico Cairola helped me with invaluable comments and suggestions and I highly appreciate the guidance and recommendations of Professor Eger and Professor Basedow. More- over, I am grateful to the Deutsche Forschungsgemeinschaft (DFG), which funded the Graduiertenkolleg “The Economics of the Internationalization of the Law” (GRK 1597/2). The generous funding enabled me to present different chapters of this book at international conferences and to receive comments and suggestions. Presentations took me to conferences organized by the World Interdisciplinary Network for Institutional Research (WINIR), the Italian Economic Association, the American Public Choice Society, the Scandinavian ReMarkLab research network, the Bundesvereinigung Deutscher Arbeitgeberverba¨nde (BDA), the International Organization of Employers (IOE), BusinessEurope and the Interna- tional Training Centre of the International Labor Organization (ILO). Further- more, I am grateful for a fellowship from the Public Choice Society supporting my stay at the 53rd Annual Meeting of the Public Choice Society in Fort Lauderdale, Florida. Two chapters of this book were pre-published in peer-reviewed journals. Condensed versions of the chapter “The Implementation of Global Framework Agreements at Subsidiaries, Suppliers and Subcontractors” were published in the International Journal of Labour Research (Vol. 7, pp. 75–94) and as a longer background paper by ILO-ACTRAV (ISBN 978-92-2-131147-8). The findings of the background paper informed a report for discussion at the ILO’s International

v vi Acknowledgements

Labor Conference 20161 in Geneva. The chapter “Looking to the Future: Media- tion and Arbitration Procedures for Global Framework Agreements” has been accepted for publication in the journal Transfer: European Review of Labour and Research.

1International Labor Organization (2016): Report for the International Labour Conference. Decent Work in Global Supply Chains, Geneva, pp. 55–56. Contents

1 Introduction ...... 1 1.1 Global Framework Agreements ...... 1 1.1.1 The Need for International Governance Structures . . . . 1 1.1.2 Emergence of Transnational Industrial Relations ..... 2 1.1.3 Future Regulatory Potential of Global Framework Agreements ...... 3 1.1.4 The Economic Analysis of Law ...... 3 1.2 Outline ...... 4 1.2.1 Foundations ...... 4 1.2.2 Effects of Global Framework Agreements ...... 5 1.2.3 Outlook ...... 6 1.3 The Added Value of This Book ...... 6 1.3.1 Creation of a New Data Set ...... 6 1.3.2 Prominent Contributions ...... 6 1.3.3 Focus on the Question as to Why Companies ConcludeGlobalFrameworkAgreements...... 7 1.3.4 Methodological Approach ...... 7

Part I Foundations 2 The Internationalization of Law: The Evolution of Labor Standards in Response to Globalization ...... 11 2.1 The Predicament: Governance Gaps ...... 11 2.2 The Evolution of Labor Standards in Response to Globalization: Towards a Global Labor Governance Regime ...... 12 2.2.1 Responses by International Organizations: Defining International Standards ...... 13 2.2.2 Government Responses: Increasing Market Transparency and Corporate Accountability ...... 16 2.2.3 Company Responses: Corporate Social Responsibility . . . 17

vii viii Contents

2.3 A Thread in the Web: Global Framework Agreements ...... 19 3 The Phenomenon of Global Framework Agreements ...... 21 3.1 New Phenomenon: Global Framework Agreements ...... 21 3.1.1 Development of Global Framework Agreements: Continuous Growth ...... 23 3.1.2 Bargaining Partners ...... 25 3.1.3 European Framework Agreements ...... 34 3.2 Content of Global Framework Agreements: Major Features and Development Over Time ...... 36 3.2.1 Research Sample ...... 37 3.2.2 References to International Standards ...... 43 3.2.3 Regulatory Objectives ...... 47 3.2.4 Scope of Global Framework Agreements ...... 53 3.2.5 The Enforcement of Global Framework Agreements . . . 53 3.2.6 Monitoring and Dispute Resolution ...... 55 4 Enforcement in Courts or Private Enforcement? ...... 61 4.1 Enforcement of Global Framework Agreements ...... 61 4.1.1 Literature Review: Legal Status of Global Framework Agreements ...... 63 4.1.2 Content Analysis of Global Framework Agreements . . . 67 4.1.3 Discussion ...... 73 4.2 Terra Incognita: Enforcement of Global Framework Agreements in Courts ...... 74 4.3 Global Framework Agreements as Instruments of Self-regulation andPrivateOrdering...... 76 4.3.1 Extra-Legal Enforcement ...... 76 4.3.2 The Sanctioning Power of Global Union Federations . . . 78 4.3.3 Discussion ...... 81 4.4 Outlook ...... 82 5 Interests and Incentives of the Bargaining Partners ...... 85 5.1 Why Do Multinational Companies and Global Union Federations Sign Global Framework Agreements? ...... 85 5.2 Global Framework Agreements Are Mutually Beneficial . . . . . 86 5.3 Interests and Incentives of Multinational Companies ...... 88 5.3.1 Reduction and Privatization of Disputes ...... 88 5.3.2 Public Relations ...... 94 5.3.3 Promotion of Equal Competitive Conditions ...... 95 5.3.4 Exogenous Requirements and Avoidance of Regulation ...... 97 5.4 Global Union Federations: A Public Choice Perspective ...... 99 5.4.1 Interests of Global Union Federations ...... 100 5.4.2 Incentives to Sign Global Framework Agreements . . . 100 Contents ix

5.4.3 Principal Agent Problems: Extensive Chain of Delegation ...... 101 5.4.4 Legitimation Function and Limitations ...... 104 5.5 Possible Obstacles to a Bargained Solution ...... 105 5.5.1 Risks and Uncertainties ...... 106 5.5.2 Transaction Costs ...... 106 5.5.3 Non-GFA Alternatives ...... 107 5.5.4 Summary of the Possible Obstacles ...... 108 5.6 The Prospects of Global Framework Agreements ...... 108

Part II Effects of Global Framework Agreements 6 The Public Relations Effect of Global Framework Agreements . . . 111 6.1 Value Creation Through Responsible Business ...... 111 6.2 An Intuitive Hypothesis: Global Framework Agreements as Signaling Devices ...... 112 6.3 A Simple Conceptualization of Signaling ...... 113 6.3.1 Codes of Conduct ...... 115 6.3.2 Global Framework Agreements ...... 116 6.4 EmpiricalEvaluation:ExplorativeandDescriptiveEvidence.... 117 6.4.1 An Illustration: The Solvay Case Study ...... 117 6.4.2 Content Analysis of Companies’ Websites ...... 120 6.5 Counterintuitive Results and Possible Explanations ...... 121 6.5.1 A Closer Look at the Descriptive Statistics ...... 123 6.5.2 Looking Beyond Descriptive Statistics ...... 128 6.5.3 Explanations ...... 129 6.6 Conclusions and Implications for Further Research ...... 134 7 The Implementation of Global Framework Agreements at Subsidiaries, Suppliers and Subcontractors ...... 137 7.1 The Implementation of Global Framework Agreements ...... 137 7.2 How Global Framework Agreements Enforce ILO Conventions in Colombia: A Case Study ...... 139 7.2.1 Carrefour: A Brief Description ...... 140 7.2.2 Implementation of the Carrefour Global Framework Agreement in Colombia ...... 141 7.3 The Implementation of Global Framework Agreements ...... 143 7.3.1 Content Analysis of Global Framework Agreements . . . 144 7.3.2 Review of Existing Case Studies on the Impact of Global Framework Agreements on Global Supply Chains...... 155 7.4 Discussion ...... 170 8 Creating Institutions for International Dispute Resolution ...... 173 8.1 Do Dispute Resolution Mechanisms Increase Compliance? . . . . 173 8.2 Dispute Resolution as a Flexibility Mechanism ...... 174 x Contents

8.2.1 The Difference Between Breach and Violation ...... 175 8.2.2 Remedies ...... 175 8.3 Application to Global Framework Agreements ...... 177 8.3.1 Distinguishing Between a Breach and a Violation in Global Framework Agreements ...... 177 8.3.2 Remedies ...... 179 8.3.3 Increased Flexibility ...... 180 8.4 The Deterrence Effect of Global Framework Agreements . . . . . 182

Part III Outlook 9 Looking to the Future: Mediation and Arbitration Procedures for Global Framework Agreements ...... 185 9.1 The Voluntary Nature of Global Framework Agreements ..... 185 9.2 The Challenge: Improving Accountability ...... 186 9.3 Reasons to Develop New Mechanisms for Dispute Resolution . . . 187 9.3.1 Intentions of the Bargaining Partners ...... 188 9.3.2 Increasing “Juridification” ...... 189 9.3.3 Increasing Complexity ...... 189 9.3.4 Preserving the Relationship Between Global Union Federations and Multinational Companies ...... 190 9.3.5 Cross-Border Disputes ...... 190 9.3.6 Cost-Effectiveness and Confidentiality ...... 191 9.4 Alternative Dispute Resolution Limitations ...... 191 9.4.1 Disputes About Rights and Interests ...... 191 9.4.2 Different Social Dialogue Traditions ...... 192 9.4.3 Limitations of Arbitration ...... 193 9.5 The Way Forward ...... 193 9.5.1 Start of a Mediation Process ...... 194 9.5.2 Defining Types of Dispute Suitable for Mediation or Arbitration ...... 195 9.5.3 Costs of Alternative Dispute Resolution ...... 195 9.5.4 Refraining from Negative Publicity ...... 196 9.5.5 Failure to Agree ...... 196 9.5.6 Mediation with Arbitration Clause ...... 197 9.5.7 Concluding Remarks on the Proposed Way Forward . . . 197 9.6 A Further Layer of the GFA Dispute Resolution Pyramid . . . . . 198 10 Conclusions: Future Regulatory Potential of Global Framework Agreements and Implications for the Economic Analysis of the Internationalization of Law ...... 201 10.1 Global Framework Agreements: A Meaningful Instrument? . . . 201 10.2 Self-regulation Through Global Framework Agreements . .... 202 10.2.1 Interests and Incentives of Multinational Companies and Global Union Federations ...... 202 Contents xi

10.2.2 Implications: Vast Regulatory Potential for a Limited Number of Companies ...... 204 10.3 The Prospects of Global Framework Agreements ...... 205 10.3.1 Strengths and Opportunities ...... 206 10.3.2 Challenges and Risks ...... 207 10.4 Lessons Learned from Global Framework Agreements for the Economic Analysis of the Internationalization of Law . . . 210 10.4.1 General Trends in the Internationalization of Law .... 211 10.4.2 Features of Global Framework Agreements That Are Distinctive from Other Internationalization Processes . . . 213

Annex ...... 215

Bibliography ...... 225 List of Abbreviations

ACTRAV Bureau for Workers’ Activities (ILO) AIAS Amsterdam Institute for Advanced Labor Studies BATNA Best Alternative To a Negotiated Agreement BDA Bundesvereinigung der Deutschen Arbeitgeberverba¨nde BWI Building and Wood Workers’ International CEO Chief Executive Officer CI Communications International CICE Carrefour European Information and Consultation Committee CoP Communication on Progress CSR Corporate Social Responsibility EFA European Framework Agreement EI-IE Education International ETUC European Trade Union Confederation EU European Union EUROFOUND European Foundation for the Improvement of Living and Working Conditions EWC European Works Council FAECYS Federacio´n Argentina de Empleados de Comercio y Servicios FIET International Federation of Employees, Technicians and Managers GFA Global Framework Agreement GNP Gross National Product GRI Global Reporting Initiative GUF Global Union Federation IAEA International Arts and Entertainment Alliance ICEM International Federation of Chemical, Energy, Mine and General Workers’ Unions ICTWSS Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts IFA International Framework Agreement [GFA]

xiii xiv List of Abbreviations

IFBWW International Federation of Building and Wood Workers IJF International Federation of Journalists IG BCE Industriegewerkschaft Bergbau, Chemie und Energie IG Metall Industriegewerkschaft Metall IGF International Graphical Federation ILO International Labor Organization IMF International Metalworkers’ Federation IndustriALL IndustriALL Global Union IOE International Organization of Employers ISO International Organization for Standardization ITC-ILO International Training Centre of the International Labor Organization ITF International Transport Workers’ Federation ITGLWF International Textile, Garment and Leather Workers’ Foundation ITUC International Trade Union Confederation ITS International Trade Secretariat IUF International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations MNC Multinational Company MEI Media and Entertainment International MNE Multinational Enterprise MNE- Tripartite Declaration of Principles concerning Multinational Declaration Enterprises and Social Policy NGO Non-governmental Organization NORMLEX Information System on International Labour Standards provided by the International Labour Organization OECD Organisation for Economic Co-operation and Development OSH Occupational Safety and Health PSI Public Services International REBITA Recurrent Earnings Before Interest and Taxes TCA Transnational Company Agreement TUAC Trade Union Advisory Committee to the OECD UK United Kingdom UPU Universal Postal Union UN United Nations UNGP UN Guiding Principles on Business and Human Rights UNI UNI Global Union US United States USD US Dollar WESO World Employment and Social Outlook report by the ILO WFBW World Federation of Building and Wood Workers List of Figures

Fig. 3.1 Development of GFAs, broken down by GUF (This graph of the development of GFAs is cited and re-printed in the ILO’s report on “Decent Work in Global Supply Chains”, which was the basis for a discussion in a committee at the ILO’s 105th International Labour Conference in 2016, p. 56). Note: IFJ International Federation of Journalists, BWI Building and Wood Workers’ International, IUF International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations, UNI UNI Global Union, IndustriALL IndustriALL Global Union. Source: Graph created and updated by the author (n ¼ 115). Based on Hadwiger, Felix (2015): GFAs: Achieving Decent Work in Global Supply Chains? In: International Journal of Labour Research, ILO-ACTRAV, Geneva, p. 77 ...... 24 Fig. 3.2 Number of GFAs, broken down by headquarters location (n ¼ 115). Source: Graph created and updated by the author (n ¼ 115). Based on Hadwiger, Felix (2015): Global Framework Agreements: Achieving Decent Work in Global Supply Chains? In: International Journal of Labour Research, ILO-ACTRAV, Geneva, p. 78 ...... 27 Fig. 3.3 Development of GFAs, broken down by geographical region. Source: Graph created by the author (n ¼ 115) ...... 27 Fig. 3.4 Development of GFAs, broken down by European countries. Source: Graph created by the author (n ¼ 93)...... 28 Fig. 3.5 Size of companies (number of employees). Source: Figure created by the author (n ¼ 59)...... 28 Fig. 3.6 Development of EFAs 2000–2011 [This figure by Müller et al. (2012) indicates a higher number of concluded GFAs than the previous chart “Development of GFAs, broken down by GUF” in this chapter. The previous chart in this chapter shows the

xv xvi List of Figures

number of companies which have signed a GFA, while Müller et al. (2012) count the number of agreements. Some companies have signed more than one GFA as these agreements are re-negotiated over the years. This explains the difference between the two numbers.]. Source: Müller, Torsten/Platzer, Hans-Wolfgang/Rüb, Stefan (2012): Transnationale Unternehmensvereinbarungen: Ein neues Instrument europa¨ischer Arbeitsbeziehungen. Friedrich-Ebert-Stiftung, Berlin, p. 5. Captions changed to English by the author ...... 35 Fig. 3.7 Content of European framework agreements. Source: Telljohann, Volker/da Costa, Isabel/Müller, Torsten/Rehfeldt, Udo/Zimmer, Reingard (2009b): European and international framework agreements: Practical experiences and strategic approaches.—Eurofound, Dublin, p. 29; Abbreviations written- out by the author ...... 36 Fig. 3.8 References in GFAs to international instruments and principles. Sources: Own calculations based on an evaluation of GFAs negotiated during 1994–2007 (n ¼ 62) compiled by Nikolaus Hammer in Papadakis, Konstantinos (ed) (2008): Cross-border Social Dialogue and Agreements. An Emerging Global Industrial Relations Framework, Geneva, p. 267; Own evaluation of GFAs negotiated during January 2009–October 2016 (n ¼ 59): based on Hadwiger, Felix (2015): Global Framework Agreements: Achieving Decent Work in Global Supply Chains? In: International Journal of Labour Research, ILO-ACTRAV, Geneva, p. 78 ...... 45 Fig. 3.9 References in GFAs to ILO Conventions (The evaluation of the references to ILO Conventions in GFAs is supposed to be included in the Recurrent Item Report for discussion at the ILO’s International Labour Conference in 2017, which will be on Fundamental Principles and Rights at Work.). Source: Figure created updated by the author (n ¼ 59): based on Hadwiger, Felix (2015): GFAs: Achieving Decent Work in Global Supply Chains. Background Paper ILO-ACTRAV, Geneva, p. 20. http://www.ilo.org/wcmsp5/groups/public/--- ed_dialogue/---actrav/documents/meetingdocument/ wcms_434248.pdf (accessed on 15.11.2016) ...... 46 Fig. 3.10 Enforcement design of GFAs. Source: Created by the author ... 56 Fig. 3.11 Number of GFAs formalizing continuous consultation meetings. Figure created and updated by the author (n ¼ 59): based on Hadwiger, Felix (2015): Global Framework Agreements: Achieving Decent Work in Global Supply Chains. Background Paper, ILO-ACTRAV. http://www.ilo.org/ wcmsp5/groups/public/---ed_dialogue/---actrav/documents/ meetingdocument/wcms_434248.pdf (accessed on 15.11.2016) ... 58 List of Figures xvii

Fig. 3.12 Dispute resolution pyramid in global framework agreements. Figure created by the author ...... 59 Fig. 4.1 GFAs and legal status (For the exact definitions of the four categories see Sect. 4.1.2). Source: Chart created by the author (n ¼ 59)...... 74 Fig. 4.2 Prisoner’s dilemma ...... 77 Fig. 5.1 Influencing and monitoring GUFs. Source: Figure created by the author ...... 102 Fig. 6.1 Evaluation of company websites. Source: Evaluation by the author (n ¼ 59)...... 122 Fig. 6.2 Evaluation of company websites by GUF. Source: Evaluation by the author: IndustriALL (n ¼ 30), UNI (n ¼ 16), BWI (n ¼ 10), IUF (n ¼ 3)...... 124 Fig. 6.3 References by company size. Source: Evaluation by the author: <50,000 (n ¼ 30), >50,000 (n ¼ 27) (The overall number of companies is reduced in this evaluation to 57 because it was not possible for the author to obtain reliable information on the number of employees for two companies.) ...... 124 Fig. 6.4 Evaluation of company websites apportioned by countries. Source: Evaluation by the author: Germany (n ¼ 9), France (n ¼ 10), Norway (n ¼ 5), Sweden (n ¼ 7), rest of Europe (n ¼ 17), rest of the world (n ¼ 11)...... 125 Fig. 6.5 References by “rights/bargaining agreements”. Source: Evaluation by the author: Bargaining agreements (n ¼ 52), Rights agreements (n ¼ 7)...... 127 Fig. 6.6 Evaluation of company websites over time. Source: Evaluation by the author: 2009 (n ¼ 7), 2010 (n ¼ 9), 2011 (n ¼ 6), 2012 (n ¼ 13), 2013 (n ¼ 10), 2014 (n ¼ 7), 2015 (n ¼ 6), 2016 (n ¼ 1)...... 127 Fig. 7.1 Inclusion of suppliers and subcontractors in GFAs (percentages). Source: Evaluation GFAs 1989–2008: Telljohann et al. (2009b): European and international framework agreements: Practical experiences and strategic approaches. – Eurofound, Dublin, p. 32; Own evaluation of GFAs negotiated during January 2009–October 2016 (n ¼ 59)...... 153 Fig. 9.1 Evolution of references to mediation and arbitration. Source: Own Evaluation of Agreements (n ¼ 115) ...... 188 List of Tables

Table 3.1 GUF overview ...... 30 Table 6.1 Rules for coding the company websites ...... 120 Table 6.2 Evaluation of company websites and computer mouse clicks . . . 122 Table 6.3 Ordered logistic regression for references on company websites ...... 128 Table 7.1 Evaluation case studies ...... 157 Table A.1 Research sample (January 2009–October 2016) ...... 215 Table A.2 List of GFAs IndustriALL ...... 217 Table A.3 List of GFAs UNI Global Union ...... 218 Table A.4 List of GFAs International Building and Wood Workers’ International (BWI) ...... 219 Table A.5 List of GFAs International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF) ...... 220 Table A.6 List of GFAs International Federation of Journalists (IJF) . . . . 220 Table A.7 Content evaluation corporate websites ...... 220 Table A.8 References to mediation or arbitration ...... 222

xix List of Boxes

Box 3.1 References to international instruments and standards ...... 38 Box 3.2 Inclusion of more specific standards ...... 38 Box 3.3 Implementation and monitoring procedures ...... 39 Box 4.1 Non-legal character of the agreement ...... 68 Box 4.2 Voluntary character of the agreement ...... 68 Box 4.3 Exclusion of third-party claims ...... 69 Box 4.4 Choice of law clauses ...... 70 Box 4.5 Legal enforceability ...... 71 Box 4.6 References to a prevailing language ...... 72 Box 4.7 References to agreement duration ...... 73 Box 7.1 Scope of application in MNCs I ...... 145 Box 7.2 Scope of application in MNCs II ...... 146 Box 7.3 Scope of application in MNCs III ...... 146 Box 7.4 Scope of application in MNCs IV ...... 147 Box 7.5 Inform and encourage suppliers and subcontractors ...... 148 Box 7.6 Potential termination of the contractual relationship I ...... 149 Box 7.7 Potential termination of the contractual relationship II ...... 150 Box 7.8 Potential termination of the contractual relationship III ...... 150 Box 7.9 Reference to the entire supply chain ...... 151 Box 7.10 Breadth of the scope of application ...... 154 Box 9.1 Disputes about rights and interests ...... 192 Box 9.2 Just cause for refusing mediation ...... 194 Box 9.3 Type of controversies suitable for mediation ...... 195 Box 9.4 Costs of alternatives dispute resolution ...... 195

xxi xxii List of Boxes

Box 9.5 Refrain from negative publicity ...... 196 Box 9.6 Consequences of a failure to agree ...... 196 Box 9.7 Mediation with arbitration clause ...... 197 Box 9.8 Arbitration clause ...... 197