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FACULTY OF LAW

Lund University

Ajda Cevc

Public Procurement of Goods as a

Tool for Transnational Promotion and

Advancement of Labour Rights

Graduate Thesis: JAMM06

Graduate Thesis, Master of Laws program

30 higher education credits

Supervisor: Radu Mares

Semester of graduation: Spring semester 2015

I. Contents

II. Summary..............................................................................................5

III. Abbreviations.......................................................................................7

IV. Preface.................................................................................................8

1. Introduction.............................................................................................9

1.1 Definitions and limitations.............................................................12

1.1.1 Public procurement........................................................................12

1.1.2 Labour rights..................................................................................13

1.2 Sources...........................................................................................13

2. Why linking labour rights to public procurement?...............................15

2.1 From public procurement to human rights through business.........15

2.2 Public procurement and human rights law?...................................20

2.2.1 What exactly are obligations of states under international human rights law?......................................................................................................21

2.2.2 Extraterritoriality............................................................................23

2.3 History of using public procurement to achieve goals beyond

purchasing.................................................................................................25

2.3.1 Public procurement as a correction of certain domestic social issues26

2.3.2 Public procurement addressing particular transnational situation 28

2.3.3 From then to now...........................................................................30

3. International trade policies overtaking the regulation of public

procurement..................................................................................................33

3.1 The EU procurement legislation....................................................33

3.1.1 Art. 18(2)........................................................................................38

3.1.2 Technical specifications..................................................................42

3.1.3 Contract award criteria..................................................................46

3.1.4 Contract performance specifications (disclosure of subcontractors)52

3.1.5 The outcomes of the new Directive................................................532

3.2 World Trade Organization’s General Procurement Agreement....56

3.3 ILO Convention concerning Labour Clauses in Public Contracts.61

4. Recent developments in public procurement of the US........................65

4.1 4.1 FAR and labour rights in general.............................................68

4.2 Amending FAR and Executive Orders..........................................70

4.2.1 Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, Executive Order 13126............................................71

4.2.2 Strengthening Protections Against Trafficking in Persons in Federal Contracts, Executive Order 13627..................................................................76

5. Public procurement in practice – implementation aspects....................82

5.1 Local approaches, initiatives and lessons on socially sustainable

public procurement...................................................................................83

5.1.1 The Norwegian approach...............................................................83

5.1.2 Surgical instruments in Swedish hospitals......................................87

5.1.3 Sweatfree Purchasing Consortium.................................................89

5.2 Learning from private procurement and responsible supply chain

management – the IKEA case..................................................................91

6. Conclusion...........................................................................................100

7. Bibliography........................................................................................104

7.1 Literature......................................................................................104

7.2 Legislation and Treaties...............................................................106

7.2.1 UN................................................................................................106

7.2.2 EU.................................................................................................106

7.2.3 ILO................................................................................................107

7.2.4 WTO.............................................................................................107

7.2.5 US.................................................................................................107

7.2.6 Other............................................................................................108

7.3 Caselaw........................................................................................108

7.3.1 EU.................................................................................................108

7.3.2 Other............................................................................................108

7.4.1 UN................................................................................................108

7.4.2 EU.................................................................................................1093

7.4.3 US.................................................................................................110

7.4.4 Other............................................................................................110

7.5 Webpages.....................................................................................111

7.6 Interviews.....................................................................................112

7.7 News media..................................................................................112

7.8 Other............................................................................................114

4

II. SummaryThe combined power of public purchases make public authorities some of

the largest buyers in the world, which means that purchasing decisions

influence market greatly. This thesis aims to explore the current legal

possibilities for transnational promotion and advancement of labour rights

through public procurement. This thesis will seek to answer whether current

international legal setup on transnational PP of goods is flexible enough to

successfully ensure respect for labour rights throughout the supply chain;

and, which are the provisions that support socially sustainable PP of goods

and which have limiting effect to it.

First of all, the thesis attempts to justify a necessity for respecting labour

rights in public procurement through international human rights obligations

of states, through alignment with international policies on sustainable

development and through coherency with business and human rights

discourse. Some historic perspective to using public procurement as a tool

contributing to wider societal policies is also given.

Then selected examples from current international legislation are evaluated.

The Directive 2014/24/EU, adopted in 2014, introduces several tools that

promote sustainable public procurement in the EU Member States. Further

international documents that regulate public procurement and thus are

relevant for analysis are the World Trade Organisation’s Agreement on

Government Procurement and the International Labour Organisation’s

Convention concerning Labour Clauses in Public Contracts. Due to the size

and global significance of the United States’ purchasing power, certain

aspects of federal legislation on public procurement are also scrutinized.

In the last chapter, practical examples are given in order to throw some light

on factual aspects of buying responsively. A short comparison with private

procurement is also given in the case of IKEA.

5

Key words: sustainable public procurement, socially responsible public

procurement, labour rights, rights at work, Directive 2014/24/EU, Federal

Acquisitions Regulation, United Nations Guiding Principle on Business and

Human Rights

6

III. AbbreviationsPP – public procurement

ILO – International Labour Organisation

UN – United Nations

SDGs – Sustainable Development Goals

GDP – Gross Domestic Product

CSR – Corporate Social Responsibility

EC, EU – European Community, European Union

TFEU – Treaty on the Functioning of the European Union

US – United States (of America)

UK – United Kingdom

WTO – World Trade Organisation

GPA – General Procurement Agreement

MEAT – most economically advantageous tender

Art. – Article

i.e. – id est

e.g. – exempli gratia

ibid. - ibidem

etc. – et cetera

et al. – et alli

USD – United States Dollars

EO – Executive Order

IMS – Indirect Material and Service

NGO – Non-Governmental Organisation

SB – Senate Bill (US)

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IV. PrefaceThis thesis would not have been possible without people around me on

whom I can depend on.

Many thanks go to Radu for support and encouragement during the studies

and for countless advices on my thesis.

Further, I would like to thank the teaching staff at Lund University for the

two years that I will never forget or regret. Knowledge of human rights that

I gained has challenged me, pushed me and, finally, changed me.

Special thanks go to Group Sustainability at IKEA, who enriched last

months of my studies and provided me with an invaluable opportunity to

bring theoretical knowledge of human rights into business environment.

To my dear classmates: getting to know you and your views while spending

time together in R-Dubz has been the most rewarding education that one can

get. This world is a brighter place since I know that such smart and

goodhearted people care for it.

And finally, an endless thank you to my family. Nothing in the world makes

me happier than making you proud and I can only hope that I will justify all

the faith that you have in me. I always got nothing but unconditional love

from you and you will always have mine.

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1. IntroductionDuring the last decades human rights have spread from traditional state

concern to legal fields that were beforehand not connected to them, e.g.

business. As a consequence of increased understanding that all actions and

operations within the society (in the private or public sphere) have impact

on human rights, one way or another, a holistic approach (meaning that in

addition to other aspect, human rights are also considered) is slowly being

implemented to various procedures. Despite tremendous progress in the

understanding of responsibility to respect human rights by business and

development of corporate social responsibility, we should not lose sight of

state’s responsibilities, as there are still various aspects of governance and

functioning of a state in which human rights are not taken in consideration

as they could and should be.

This thesis will discuss one such area, namely public procurement

(hereinafter: PP). For easier understanding of what PP has to do with human

rights we can portray a general example of a developed state X, where

citizens are enjoying high human rights standards. State X decides to buy

new computers for employees of several central governmental bodies.

Central purchasing body of the government X publishes request for tenders

for three thousand computers. After due date, the government chooses the

tender with the lowest price per product by company L. But the authorities

of State X disregard the fact that minerals which are used for production of

those computers were bought in State A from rebel groups, and are hence

directly funding an armed conflict. Wires used in these computers were

produced in State B with the help of child labour. In State C, where

computers were assembled, migrant workers in factories do not have

freedom of movement as their passports are confiscated by employers. And

finally, company L is also tightly cooperating with government of State Y,

which is known for its undemocratic regime, corruption and disrespect for

basic human rights of its people. The example demonstrates that State X is

unknowingly financing and thus to certain extent being linked to human

rights practices that are unacceptable in State X. PP can therefore contribute 9

to infinite number of violations of labour rights and other human rights that

can be affected by business activities. Forced labour, child work, bonded

work, unsafe and harmful working environment, wages below the

acceptable living wage, discrimination, denial of freedom of association,

denial of free time and degrading treatment are some of the worst violations

at work. If public authorities are in a position to facilitate these violations by

financially supporting them (through PP), it should also be possible for them

to transform this power into a positive force by taking more holistic

approach to purchasing.

In the example above we stumbled upon several human rights aspects, such

as the role of state to protect and respect human rights, the responsibility of

business to respect human rights, the extraterritorial application of human

rights standards etc. and, in a wider sense, politics of the international

community regarding market economy and human rights. PP potentially

involves numerous human rights issues, though this thesis will mainly focus

on labour rights.

There are several reasons for PP to be afforded greater attention in regard to

human rights. As we have seen, PP can be linked to human rights violations.

Since PP is conducted by states or better to say state’s actors, which are

primary duty holders in regard to human rights, this raises questions on

whether a state is not bound to respect human rights in every aspect of its

governance and conduct. Additionally, PP is carried out with tax payers’

money, which means that the authorities have certain accountability towards

its tax payers. Furthermore, human rights have become one of decision

factors in private procurement and in dealing with supply chains, which has

created certain inconsistencies as private procurement can (and in some

cases does) adhere to much higher social standards than poorly developed

public procurement. Bearing in mind that authorities have the primary role

in protecting human rights, it seems reasonable to explore PP as one of the

tools to promote and improve human rights.

The main objective that this thesis is pursuing is to discover what the

possibilities for socially sustainable PP within the current legislative

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framework are. The task will be twofold, as we will not only try to seek

options for respect for labour standards in relation to PP, but also for their

advancement and improvement. Since we will mainly focus on goods

coming from developing countries, the improvement is of utmost

importance, as holding on to the bare minimum is, first of all, contrary to the

nature of social rights which demand progressive realization, and, secondly,

poses a danger that due to already very low level of rights in developing

countries, solely demanding observance of the minimum requirements does

not create an environment conducive to improvement and possibly creates a

ceiling rather than a floor of rights. The aspect of sustainability that will be

discussed is labour rights.

The main questions that are to be answered through the analysis of this

thesis are following: is current international legal setup on transnational PP

of goods flexible enough to successfully ensure respect for labour rights

throughout the supply chain?; and, which are the provisions that support

socially sustainable PP of goods and which have limiting effect to it?

Partially we will also look into whether including labour clauses in PP of

goods can be effectively combined with the principles that govern modern

PP.

This thesis will first establish in more detail how PP can positively influence

labour rights transnationally and why the authorities should exercise their

activities in this direction. Both positive and negative aspects of including

labour clauses in PP will be evaluated. Furthermore, the possibilities for

promoting and improving labour rights within the current legislations,

national and international, will be explored. Undoubtedly, we will have to

consider and compare PP with procurement in private sector, which might

offer some valuable solutions. Various examples of purchasing practices

will provide the basis for drawing some conclusions on to what extent

labour standards are (or could be) included in PP in the current legislative

and political environment.

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1.1 Definitions and limitations

1.1.1 Public procurementFor the purpose of this thesis it will be sufficient to understand and use a

very simple definition of PP as a process by which public authorities, being

on a state, regional or local level, acquire services or goods on a market

following a special procedure.

The most typical PP procedure includes the following steps:

1. Recognition by the public authority (also contracting authority) that

a need for specific good or service exists.

2. Publication/announcement of invitation to tender (with potential

terms, price, technical specifications, etc.)

3. Bid submission by economic operators/tenderers.

4. Evaluation of tenders/bids by the contracting authority.

5. Awarding a contract to the successful economic operator/tenderer.

6. Project implementation or contract fulfilment.

It is important to stress that there are numerous variations to this basic open

procedure described. Other well-known and used types are, amongst others,

restricted procedure in which only selected candidates are invited to submit

a tender, the negotiated procedure in which the contracting authority

negotiates price and terms of contract with economic operators, and

competitive dialogue, in which solutions are discussed with economic

operators.1

We will not go into details of the PP process as it is not relevant to the

purpose of this thesis to discuss legal technicalities of PP. However, it is

important to keep in mind the different steps of the process, because this

will become relevant later on when we will be discussing stages of the

procurement process at which labour clauses should be included (e.g. setting

labour standards as one of the demands/aspirations in the publication step or

using labour standards as one of the award criteria).

1 Summaries of EU legislation: Rules on public works contracts, public supply contracts and public service contracts, applicable until 2016.

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We will mainly focus on procurement of goods and materials as they offer

better ground for exploring the issues of extraterritoriality and supply

chains.

Literature in PP field uses different adjectives to mark holistic approach to

PP, such as green PP (concentrating on environmental aspect), socially

responsible PP and sustainable PP. The latter is widely used and can entail

all aspects of sustainability. In this thesis socially responsible PP and

sustainable PP are used as synonyms and will signify

consideration/inclusion of labour rights into PP practices.

1.1.2 Labour rightsAs already mentioned, PP can influence various human rights, but this thesis

will focus on labour rights. This covers the entire International Labour

Organization’s (hereinafter: ILO) legal framework, but main emphasis will

be given to four fundamental rights at work (as to ILO Declaration on

Fundamental Principles and Rights at Work2), i.e. freedom of association

and the effective recognition of the right to collective bargaining, the

elimination of all forms of forced or compulsory labour, the effective

abolition of child labour and the elimination of discrimination in respect of

employment and occupation.

Naturally, we will not remain at this minimum level of protection of

workers when talking about developed countries, but in the circumstances of

developing countries where even the most basic rights are not respected, it is

reasonable to focus on those.

The terms labour clauses and social clauses in connection with PP will be

used as synonyms.

1.2 SourcesDuring the course of this thesis various legal sources will be used. The main

source will be international laws related to PP on the UN, ILO, WTO and

EU level. Naturally, secondary policies and supporting documentation will

be just as relevant to support the analysis of the legislation. As to the 2 ILO Declaration on Fundamental Principles and Rights at Work, 1998.

13

national legislation on PP, the federal legislation of the US will mostly be

used, though certain examples will also be drawn from the legislative

examples of the EU Member States.

Apart from the legislation, work of academia and various stakeholders such

as NGOs and trade unions will be used to support and guide the analysis.

Last chapter is more practice-oriented and for this reason two interviews

were conducted.

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2. Why linking labour rights to public procurement?

This chapter will try to theoretically justify a necessity for public authorities

to involve labour rights into PP for reasons of coherence with policies

regarding corporate social responsibility, coherence with international

human rights law in general and sustainable development. Furthermore, we

will look into some historic examples of using PP for pursuing national and

transnational social justice. In the last decades PP has moved from being a

tool complementing domestic social policies to simply being a transparent

and internationally accessible process of acquiring goods (and services) for

the lowest possible price without much other consideration. We will outline

the principles of modern PP and evaluate the positive and negative reasons

for including labour clauses into such processes.

2.1 From public procurement to human rights through business

Development of world economy and increased power of international

corporations in the last decades has led to development in the field of

business and human rights. Due to the increasingly well documented

impacts of business operations on human rights the traditional dichotomy of

a relationship individual – state has been more or less successfully expanded

to include another subject, namely companies, which is evident from

unanimous support that UN Guiding Principles on Business and Human

Rights have received and from the subsequent movement towards beginning

negotiations on an international legally binding instrument on Transnational

Corporations and Other Business Enterprises with respect to human rights.3

This demonstrates that the usage of human rights is to a certain extent

progressing and expanding in line with the developments in other aspects of

the society and we will try to link these trends to PP.

3 More at: http://business-humanrights.org/en/binding-treaty, (3.3.2015).15

For the purpose of our argument, we will draw two main reasons or

rationales behind expanding the human rights debate to wider scope of

society actors and their activities.4 First reason would simply be the fact that

great power brings great responsibility.5 In 2011, 43 out of 100 largest

economies in the world were companies (based on gross domestic product

of countries and total revenue of companies).6 This means that companies

benefit greatly from the current socio-economical system in the world,

which consequently indicates that they also poses power to make change

and address the negative impacts in the society, maybe even the ones that

they are benefiting from. The unanimous support for UN Guiding Principles

on Business and Human Rights demonstrates that states (as other

stakeholders) are aware and concur with this notion.

Second argument is the holistic approach to sustainable development in

general and to human rights in particular, which has been much highlighted

and promoted on international level in the last decades, resulting, amongst

other, in Millennium Development Goals7 and now in Sustainable

Development Goals (hereinafter: SDGs).8 SDGs are intergovernmental

process, but are universally applicable and (try to) include all stakeholders.

The universal recognition of the principal priorities for humanity cannot

remain overlooked by business and market actors, especially in light of the

argument above (they have significant power to contribute to the cause). It

urges states to implement outlined aspirations to all aspects of governance,

which should not stay limited to traditional state actions only (as in the

scope of legislative, executive and judiciary role).9 Such holistic approach is

4 By this outline we do not try to diminish significance of other economic, societal, moral etc. reasons.5 This statement is by no means implying that only entities with great power have certain responsibilities. Nevertheless, UN Guiding Principles on Business and Human Rights clearly state that the responsibility to respect human rights applies to all companies (and other entities) irrelevant to their size.6 White, S., The Top 175 Global Economic Entities, 2011. Available at: http://dstevenwhite.com/2012/08/11/the-top-175-global-economic-entities-2011/, (7.3.2015).7 UN Millennium Goals. http://www.un.org/millenniumgoals/, (7.3.2015).8 UN Sustainable Development Goals. https://sustainabledevelopment.un.org/topics/sustainabledevelopmentgoals, (7.3.2015).9 The entire language of the SDGs refers to policies, strategies, approaches, measures etc. that states are supposed to use in order to achieve the goals set. E.g. target 8.7 suggest “immediate and effective measures” to eradicate forced labour, etc. Such broad language implies that states should use every tool in its power to support the objective concerned and

16

a consequence of understanding that every decision in the society has an

effect on human rights (among others). With such stand it became obvious

that economic sector cannot go on with business as usual as it has a

significant role in the society.

Development and launch of the UN Guiding Principles on Business and

Human Rights can be understood as a logical effect of such holistic

approach.10 Due to its soft law nature it is obvious that the matter is still new

and needs time to get materialized in more specific instruments,11 but it

nevertheless signifies understanding that companies can through their

activities cause, contribute or be linked to adverse impacts on human

rights.12 It might seem hard to believe that half a century of human rights

development was needed for a proper policy level recognition of influence

that business (and other processes in the society not connected to

governance) have on human rights or rather to say for recognition that

solely relying on state’s (legislative, executive and judiciary) role of

protecting and fulfilling human rights will not be sufficient for adequate

fulfilment of universal enjoyment of human rights.13 Regardless the time

needed, the understanding is growing and now it is time to create effective

mechanisms for protection of human rights in all processes of private and

public sector that can affect human rights.

And where does public procurement fit in? Solely by applying two

arguments outlined above (and forgetting for a moment the fact that we are

talking about public authorities being the subject), we can presume that

PP could definitely be such tool.If we look at SDGs even broadly, beyond states and its authorities and functions, it is clear already from the preamble to the SDGs that this global agenda’s success depends on partnership of all stakeholders and all people, therefore including all actors in the society, including business.10 And, consequently, an effect of clear evidences of numerous cases in which gross human rights violations by businesses go unremedied.11 Ruggie, J., A UN Business and Human Rights Treaty? An Issues Brief., Harvard Kennedy School, 28.1.2014.12 A/HRC/17/31. Report of the Special Representative of the Secretary- General on the issue of human rights and transnational corporations and other business enterprises. Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework. 17th Session, 21.3.2011, (hereinafter “UN Guiding Principles on Business and Human Rights”). Principle 13.13 There were soft law documents on corporate social responsibility dating as early as 1976 (The OECD Guidelines for Multinational Enterprises), but none before has received universal recognition and support by all stakeholders.

17

certain responsibility to respect human rights exists: we are talking about a

major actor on the international market (e.g. almost 20% of gross domestic

product (GDP) in the European Union is spent on public procurement14) and

as such it should make sure to contribute its part to common quest for

sustainable development.

Due to the arguments above, it would be highly incoherent to talk about

human rights and business without including actions and role of the states in

a private market sphere. For this reason, one of the three pillars of UN

Guiding Principles on Business and Human Rights is clarifying state’s role

to protect human rights. This duty to protect is expanded to areas of state’s

functions and actions that are not commonly addressed by human rights law,

e.g. state-owned companies, privatizing state services, public procurement

etc.

Principle 5 of the UN Guiding Principles on Business and Human Rights

affirms a well-established notion that privatizing public services cannot

result in impacting the enjoyment of human rights that those services are

providing or affecting. This is relevant as a state might chose service

providers through some kind of procurement process, but this thesis focuses

on procurement of goods, so we will not further elaborate on services.15

Principle 6 urges states to “promote respect for human rights by business

enterprises with which they conduct commercial transactions.” Commentary

to Article 6 recognizes that PP represents “unique opportunities to promote

awareness of and respect for human rights by those enterprises, including

through the terms of contracts.” It might come as a surprise that such

insubstantial wording as “promoting awareness and respect” is used in this

case,16 where it could say that public procurement is an opportunity to

14 European Commission, Public Procurement Indicators 2010. Available at: http://ec.europa.eu/internal_market/publicprocurement/docs/indicators2010_en.pdf, (7.3.2015).15 See generally: Hallo de Wolf, A. G., Reconciling Privatization with Human Rights. Antwerpen: Intersentia, International Law Series, 2011.16 Certain level of inconsistency might even be present when comparing Principles 6 and 13, since there is a difference in expectations from PP officers/authorities on the one hand, and state authorities in a general sense and from private companies on the other hand. The latter two have clearly defined responsibilities in regard to human rights, whereas the responsibilities within PP are not so clear.

18

ensure that business enterprises respect human rights and even contribute to

the increase of standards. Nevertheless, a soft law document should have

aspired to standards higher than those that could realistically be expected in

the current hard law. But bearing in mind, for the most part, this document

is introducing ideas that even a decade ago appeared more like a science

fiction, it seems that pragmatic approach had to be taken in order to get the

necessary support.

Further interesting point in the commentary to the Principle 6 is the

statement that terms of PP contract (through which states could promote

awareness of and respect for human rights) have to consider States’ relevant

obligations under national and international law. This will become relevant

in the following chapters of this thesis where we might stumble upon a fact

that certain international obligations of states can prevent effective inclusion

of labour rights in PP, especially international obligations regarding free

market and trade. If certain inconsistencies amongst pursuits of

economic/trade agreements and transnational social sustainability are

discovered, this might very well open the debate of hierarchy of values and

priorities in international law and policies in general. PP is indeed an area

where human rights are trying to enter the playground; so far, it has only

entailed predominantly economic tools, so introducing human rights might

turn out not to be in line with the economic pursuits of PP established

throughout history. Nevertheless, human rights law and e.g. international

trade law developed relatively separately and without significant interaction

for decades also on international level.17 This might be a further reason why

the UN Guiding Principles on Business and Human Rights remain rather

restrained in its wording and as such truly represent only “an end of the

beginning.”18

17 See generally: Schlemmer-Schulte, S., Fragmentation of International Law: The Case of International Finance & Investment Law Versus Human Rights Law, Pacific McGeorge Global Business & Development Law Journal, 2012. Vol. 25 Issue 1, p. 409-424.; Benvenisti, E., and Downs, G. W., The Empire's new clothes: Political economy and the fragmentation of international law, Stanford Law Review, 2007. Vol. 60 Issue 2, p. 595-631.; Jensen, H. B., From economic to sustainable development: Unfolding the concept of law, Systems Research and Behavioural Science, 2007. Vol. 24 Issue 5.18 UN Guiding Principles on Business and Human Rights. Introduction, para. 13.

19

Some attention has to be given to the coherency of public policies on

business and human rights or corporate social responsibility (hereinafter:

CSR). As demonstrated above, the topic has received a lot of attention on

international level in the last years, but it did not stay just on the

international level as several states are considering (or have already

developed) national action plans on implementation of strategies in

domestic legal orders.19 If states do not develop similar mechanisms for PP,

they will find themselves in a rather paradoxical situation: states would

require companies to go beyond the demands of law (by including

environmental and human rights factors), whereas they would not do the

same in PP.20 We will further elaborate on this topic in the following

chapters, for now it is sufficient to outline this issue as one of the reasons

for inclusion of labour rights in PP.

2.2 Public procurement and human rights law?We have established that public authorities in their market subject capacity

should respect human rights at least equally as other subjects on the market

because of their size and effect and furthermore for the reason of coherency

and legitimacy of policies on human rights and business. Further fact that

we are talking about public authorities – representatives of a state, which is

a primary duty holder in regard to human rights – and not merely one of the

subjects on a market, supports this theory even more.

This leads us to the question whether it would be possible to advocate for

labour clauses in PP (with an intention of transnational improvement of

workers’ situation or prevention of violations) as part of states’ obligations

under international human rights law.

Looking at it strictly from a legal standpoint, hardly. We will look into

several aspects of international human rights law that turn out to be

19 More at: http://www.ohchr.org/EN/Issues/Business/Pages/NationalActionPlans.aspx, (10.3.2015).20 McCrudden, C., Public Procurement and Corporate Social Responsibility; in McBarnet, Voiculescu, and Campbell (eds.), The New Corporate Accountability: Corporate Social Responsibility and the Law. Cambridge University Press, 2007. P. 93-118.

20

questionable when speaking about a duty of public authorities to include

labour clauses in PP under international human rights law.

2.2.1 What exactly are obligations of states under international human rights law?

To start on a very general level, international human rights treaties create

obligations for ratifying states, but not for public authorities of these states.

Government is obliged to implement human rights standards and principles

into national legislation at all relevant levels and areas. Public authorities

are therefore bound by these laws, which should reflect principles from

treaties. But in which laws and procedures regarding public authorities

should human rights principles be implemented? Only into those in which

public authorities exercise official functions and act in official capacity, or

into all laws and regulations that regulate all aspects of their functioning

(e.g. procurement, maintenance, technical services, administration etc.)?21

The Committee on Economic, Social and Cultural Rights is of the opinion

that a State Party should “use all the means at its disposal to give effect to

the rights recognized in the Covenant.”22 We argued above that PP is a

powerful tool due to its size and consequent effect, thus it can be used to

improve labour rights. Of course, PP is naturally not a typical tool for

achieving social policy goals or exercising authority, but because of its

effect it could and should be recognized as additional tool to secure respect

for relevant human rights.23 In its Discrimination (Employment and

Occupation) Recommendation No. 111 ILO advises that “government

agencies should apply non-discriminatory employment policies in all their

activities.”24 It goes even further and, as one of the methods to promote the

observance of the Convention (Labour Clauses, C94), explicitly mentions

21 For the purpose of section 3.2.1 we dismiss the existence of problematic extraterritoriality factor.22 UN Doc. E/1999/22. The Committee on Economic, Social and Cultural Rights, Report on the 18th and the 19th session. General Comment n.9, section A, para. 2.23 At this point we are talking about the PP as “a tool” for achieving social policy goals, but one has to keep in mind what was mentioned earlier – that UN Guiding Principles on Business and Human Rights consider PP actions having the same responsibility regarding human rights as a private entity – responsibility to respect.24 ILO Recommendation no. 111 Discrimination (Employment and Occupation), 1958. Art. 2(c).

21

“making eligibility for contracts involving the expenditure of public funds

dependent on observance of the principles.”25 The Committee on the Rights

of the Child specifically noted in its General Comment No. 16 under the

title ‘The obligation to respect’ that States

“... should not engage in, support or condone abuses of children’s rights when it has a business role itself or conducts business with private enterprises. For example, States must take steps to ensure that public procurement contracts are awarded to bidders that are committed to respecting children’s rights.”26

Further justification might be found by combining two principles relevant to

social rights – progressive realization of social rights and international

assistance and cooperation in achieving them.27 The Committee on

Economic, Social and Cultural Rights established that just legislation is not

enough28 and that ‘any tool/steps’29 should be taken in order to reach

progressive realization. “All States parties”… should … “take steps,

individually and through international assistance and cooperation, especially

economic and technical”… to achieve full realization.30 The Committee

concludes that the Covenant read together with UN Charter31 suggests that

“international cooperation for development and thus for realization of

economic, social and cultural rights is an obligation of all States.”32 As it is

obvious from Committee’s opinion, term “cooperation” is not limited to

developmental cooperation, but includes wider range of activities of state.33

According to Künnemann, the term co-operation “has been reduced to and

identified with development aid” in recent years.34 A modernized view of

state’s obligation of international cooperation and assistance under the

25 Ibid. Art. 3(b)(iii).26 CRC/C/GC/16. UN Committee on the Rights of the Child, General comment No. 16 (2013) on State obligations regarding the impact of the business sector on children’s rights. Adopted by the Committee at its sixty-second session, 2013.27 UN General Assembly, International Covenant on Economic, Social and Cultural Rights. United Nations, Treaty Series, vol. 993, 16.12.1966. Art. 2(1).28 U.N. Doc. E/1991/23. UN Committee on Economic, Social and Cultural Rights, General Comment 3, The nature of States parties' obligations. 5th Session, 1990. Annex III at 86 (1991), para. 4.29 Ibid. Para. 8.30 Ibid. Para. 13.31 1 UNTS XVI. United Nations, Charter of the United Nations, 24.10.1945.32 Supra n. 28. Para. 14.33 Künnemann, R. The Extraterritorial Scope of the International Covenant on Economic, Social and Cultural Rights. Forum for a New World Governance, 2001. Available at: http://www.world-governance.org/article48.html, (13.3.2015). Page 4.34 Ibid. Page 10.

22

International Covenant on Economic, Social and Cultural Rights therefore

could entail social clauses in PP as one of the tools to contribute to

progressive realization of social rights.

However, except for several general provisions of non-mandatory nature

(General Comments to the Covenant and ILO Recommendations), we

cannot find anything more tangible in the human rights treaties that would

create an obligation of states to implement human rights/labour clauses in

PP under international human rights law.

2.2.2 ExtraterritorialityBy the nature of international law, human rights treaties generally create

obligations for states in regard to their territory and subjects within its

jurisdiction. The International Covenant on Civil and Political Rights in

Article 2(1) specifically refers to “to all individuals within its territory and

subject to its jurisdiction.”35 The International Covenant on Economic,

Social and Cultural Rights does not mention territory or subject specifically,

but talks about taking steps “individually and through international

assistance and co-operation,” which, as we mentioned above, might be

understood as adding some kind of ‘transnational dimension of the

realisation of economic, social and cultural rights.’36 Lack of extraterritorial

application of international human rights law is probably one of the biggest

impediments to effectiveness of the system. Human rights system is based

on a paradigm of a person as a right holder on the one side and a state as a

duty holder on the other, which implies that mutual existence is necessary.

The right exists only if there is a duty and vice versa.

Further consequence is also justiciability of the right or better to say legal

redress in the case of its violation. If a right and a parallel obligation exist,

there has to be a corresponding legal remedy for the enforcement of the

right. A Mexican worker, whose core rights at work have been violated, has

35 UN General Assembly, International Covenant on Civil and Political Rights, United Nations, Treaty Series, vol. 999, 16.12.1966. P. 171.36 Coomans, F., Application of the International Covenant on Economic, Social and Cultural Rights in the Framework of International Organisations, Max Planck Yearbook of United Nations Law, 2007. Vol. 11, p. 359-390.

23

remedies available only towards Mexican authorities.37 In no circumstance

has this worker remedies based on human rights law available towards e.g.

German government, which procured products that were produced in his

factory. This by no mean suggests that German authorities should not make

everything possible to try to prevent and mitigate violations, as this thesis

tries to argue, but it does imply that such action by German authorities is

legally not part of their international human rights obligations.

Having said all that, if we move out of the limited scope of international

legal obligations and turn to international policy and goals, it is possible to

draw certain conclusions that suggest that states nevertheless should not be

careless while procuring.

The Charter of the UN has established in preamble that one of the goals and

purposes of creating UN is “to employ international machinery for the

promotion of the economic and social advancement of all peoples.”38

On a more current note, decent work for all will be one of the SDGs, the

post 2015 global agenda. The Open Working Group on SDGs emphasizes

each countries’ “primary responsibility for its own economic and social

development.”39 At the same time other countries should be active by

“significant mobilization of resources from a variety of sources and the

effective use of financing.”40 Sustainable PP can represent a strong example

of how states can through effective policies achieve significant impact

directly in its supply chain and also indirectly through transformation of the

market as a whole. This is also the only way for states to achieve a policy

coherence – adopting measures for social development would not have the

same impact, if simultaneously PP would be undermining these primary

measures by financing bad practices.

This seems to be exactly the same conclusion and approach that Special

Representative John Ruggie took, as he “concluded that the extra-territorial

37 Of course, after and if the violations of worker’s rights would not have been remedied in a case against the private employer.38 UN, Charter of the United Nations, 1945.39 Open Working Group proposal for Sustainable Development Goals, Introduction, para. 12. Available at: https://sustainabledevelopment.un.org/sdgsproposal, (15.3.2015).40 Ibid.

24

dimension of the state duty to protect human rights in relation to business

entities remains unsettled in international law,” and rather “shifted the

emphasis of debate from states extra-territorial obligations under human

rights law to states policy rationales to protect human rights in their

international relations.”41 And this is what the perspective that this thesis is

pursuing – using socially sustainable PP policies through which public

authorities can and should contribute to respect of labour rights

transnationally without getting trapped to territorial and other legal restraints

of international human rights law. The normative part (should) in this

standpoint is based on the recognition of certain level of responsibility of

public authorities in PP by the Guiding Principles on Business and Human

Rights; and, as we will see later on in the part 3.1, on the fact that the EU

adopted the same view by establishing the respect for core labour rights

(amongst others) as a mandatory component of PP.

2.3 History of using public procurement to achieve goals beyond purchasing

Now we are moving from the theoretical underpinnings of using PP in a

way to achieve human rights effect and will look towards actual examples

of using PP beyond its primary role, which is acquiring necessary goods or

services. We will thus demonstrate the effects that PP can have on a market

and society in practice.

In this section we will present a short overview of several historical

legislative examples which used PP for various human rights related

purposes. Examples will be divided into two groups: those in which PP

served as a corrective to specific domestic social situation, and those in

which PP was used to address particular situation of transnational injustice.

At the end we will turn to present and draw out principles of PP that have

41 Augenstein, D., and Kinley, D., When human rights ‘responsibilities’ become ‘duties’: the extra-territorial obligations of states that bind corporations, in Bilchitz and Deva (eds.), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? Cambridge University Press, 2013; Sydney Law School Research Paper No. 12/71.Also look at: A/HRC/11/13. Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises. Human Rights Council, Business and Human Rights: Towards Operationalizing the “Protect, Respect and Remedy” Framework. 11th Session, 22.4.2009. Para. 15.

25

been established through the development of market economy. This will

give us a chance to evaluate positive and negative aspects of using PP to

transnationally advance respect and fulfilment of labour rights. It will

furthermore help us to evaluate current (legislative) practices in the

following chapters.

2.3.1 Public procurement as a correction of certain domestic social issues

Since the market economy system can leave out certain groups of people,

usually the marginalized ones, states have often used PP as one of the means

to include them in the market or to increase their participation. People with

disabilities, indigenous groups, unemployed people, women, rural

population, veterans, minority racial groups, young people etc. have

benefited from various PP policies.

One of the earliest examples is the Fair Wages Resolution,42 which was

passed by the UK’s House of Commons in 1891, recognizing

“That in the opinion of this House it is the duty of the Government in all Government contracts to make provision against the evils which have recently been disclosed before the House of Lords’ sweating committee, and to insert such conditions as may prevent the abuses arising from subletting, and make every effort to serve the payment of the rate of wages generally accepted as current for a competent workman in his trade.”43

This act granted the workers labouring for private employers under public

contracts wages that were generally accepted for the certain type of work. It

demonstrated awareness of the authorities that due to its significant size PP

could cause negatives effect on the wages. In the terminology of socially

responsible PP that we are trying to argue here, we can explain this example

as the government recognizing the adverse impacts that subletting of

services had caused for workers and acting on it in order to nullify these

effects.

Workers with disabilities have often benefited from various favourable PP

provisions. In the US, the Wagner-O’Day Act in 1938 established a

Committee on Purchases of Blind-made Products, and for other purposes,

42 Brodie, D., A History of British Labour Law 1867-1945, Hart Publishing, 2003. Page 50.43 Ibid. Also: Committee on Government Contracts, Fair Wages Resolutions, 1897.

26

which set the prices of brooms and mops and other suitable products

produced by the blind in non-profit institutions.44 The Act demanded that

any Federal department or agency has to buy these products (with certain

limitations to price and availability).45 This and similar policies reached as

much as 155,000 workers with disabilities in 3,000 workshops until 1976.46

Such policies were especially typical after wars, where large numbers of

people were excluded from the market of work.47 Similar ‘set-asides’ and

price advantages for certain groups of people are still part of some national

legislations and are also allowed to certain extent by international

legislation/agreements on PP.48

A significant part of social goals supported by PP has regularly been status

inequalities. Better to say, to achieve de facto non-discrimination of a

certain group in a society, PP was and still is used as one of the tools to

diminish differences and secure higher presence of the group on the market.

One such example can be found in Malaysia, where tensions among native

Malays or Bumiputera and Chinese have existed since the British colonial

days. Bumiputeras were severely economically disadvantaged and in 1969,

tensions escalated to riots.49 The path that the Malaysian government has

taken to secure better economic participation of Bumiputeras on the market

is rather unusual as the preferential treatment for disadvantaged

Bumiputeras is even constitutionalized.50 Based on Article 153 of the

Constitution, exclusive Bumiputera programs in various areas (education,

licensing) and quotas in education, employment and ownership were

introduced.51 One of the principal measures was a preferential system in PP,

awarding government contracts to the majority Bumiputera-controlled

44 McCrudden, C., Buying Social Justice, Oxford University Press, 2007. Page 61.45 Ibid. See also: PL 739, Wagner-O'Day Act.46 McCrudden, Buying Social Justice, 2007. From: Burkhauser, R. and Haveman, R., Disability & Work: The Economics of American Policy, The Johns Hopkins University Press, 1982.47 See McCrudden, Buying Social Justice, 2007. Pages 56-62.48 Ibid. Also: Directive 2014/24/EU of the European Parliament and of the Council on public procurement and repealing Directive 2004/18/EC. Article 20.49 McCrudden, Buying Social Justice, 2007. Page 234.50 Malaysia: Federal Constitution, 31.8.1957. Art 153.51 Lee, H., Racial Inequality and Affirmative Action in Malaysia and South Africa, University of Massachusetts Dissertations, Paper 291, 2010. Page 68-71.

27

companies.52 This measure, together with equity quotas in companies,

boosted the process of wealth equalization, which improved overall equality

between the groups.

The Malaysia example demonstrates how important economic presence and

equality on the market is for general equality and equity in the society. It

furthermore shows how PP can positively influence human rights by

creating a more balanced market. It does not come as a surprise that similar

redistributive PP policies were used to advance equality in several countries

(indigenous peoples in Canada, African-Americans in US, black in South

Africa after apartheid, religious groups in Northern Ireland etc.).53

2.3.2 Public procurement addressing particular transnational situation

In addition to contributing to enforcement of domestic policies that we

mentioned above, PP has, though in rare cases, been used to address

particular political and social situations outside of a state that has adopted

measures. We will mention two such examples, both originating from the

US.

First are the MacBride Principles54, which addressed religious and ethnic

discrimination in the Northern Ireland. The Principles primarily addressed

the US companies that were doing business or were otherwise involved in

the economic activities in the Northern Ireland to respect nine fair

employment principles.55 The Principles became law at the federal level56 in

October 1998 and part of the campaign was also to lobby federal states and

cities to adopt laws, implementing the Principles into their purchasing of

goods and services.57 Such laws have been passed in 16 States; and have

been passed or endorsed by over 40 Cities.58 In the terms of UN Guiding

Principles, the US Government recognized that economic activities of its 52 McCrudden, Buying Social Justice, 2007. Page 236.53 See generally McCrudden, Buying Social Justice, 2007.54 The Macbride Principles, by Father Sean McManus, President, Irish National Causus, December 1997.55 For more information about the MacBride Principles and the text, see: https://www1.umn.edu/humanrts/links/macbride.html, (10.9.2015).56 Omnibus Appropriations Act for Fiscal Year 1999, 105th Congress Public Law 277.57 McCrudden, Buying Social Justice, 2007. Page 271.58 Supra n.54.

28

authorities and business subjects are contributing and are linked to (amongst

other) employment discrimination in another country. By such legislation

the US added additional economic pressure that contributed to the effect of

political pressure. Similar principles were created in the US for South Africa

in the time of apartheid as well, though the Sullivan Principles59 were not

part of the legislation and were therefore voluntary-based.

Second example of transnationally addressing human rights violations and

undemocratic regime is the Massachusetts Burma Law. The Law was

enacted by the Commonwealth of Massachusetts in 1996 and limited state

entities from procuring goods or services from companies which were doing

business in or with Myanmar (then Burma).60 This upset the companies that

were included on the so called restricted list that was gathered by the

Commonwealth. The National Foreign Trade Council representing

companies took this legislation to the US Supreme Court, where it argued

that the law infringed federal government’s authority regarding international

affairs and trade. The Court affirmed these allegations and nullified the law

as it was in the breach of the US Constitution.61 Business community was

not the only one to oppose this law, as the US also faced complaints at the

World Trade Organization (WTO) disputes panel by the European

Community (hereinafter: EC) and Japan. The EC was of the opinion that the

US were in breach of the WTO’s General Procurement Agreement (GPA)62

by imposing condition on a tendering company, which were not essential for

fulfilment of the contract (Article VIII(b)); by imposing qualification

criteria that were politically based rather than economic (Article X); by

expanding interpretation of the award criteria under Article XIII(4)(b) to the

point of allowing political instead of economic considerations; and finally,

by breaching non-discrimination and equal treatment under Article III.

59 About: Roth, M., Sullivan Principles, news article, The Encyclopedia of Greater Philadelphia, Rutgers University, 2013. Available at: http://philadelphiaencyclopedia.org/archive/sullivan-principles/, (24.3.2015).60 McCrudden, Buying Social Justice, 2007. Page 271.61 Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000). More about the political environment around the case; See: Massachusetts Burma Procurement Law Challenged at WTO, article, Public Citizen, Washington, 1999. Available at: https://dev.citizen.org/our-work/globalization-and-trade/articles/massachusetts-burma-procurement-law-challenged-wto, (28.3.2015).62 WTO, Agreement on Government Procurement, GPA/W/313, 16.10.2010.

29

Since the law was nullified by the Supreme Court, the EC and Japan

suspended their WTO challenge, so the disputed violations of the articles

were never interpreted.63

The Massachusetts Burma Law example unfolds the main issue that will be

in the centre of our focus in the following chapters: is international market

and trade legislation on PP flexible enough to successfully achieve

transnational respect of labour rights?

The historic examples have taught us several valuable lessons, namely how

significant a factor PP is for achieving equality in a society; that PP can

have an effect big enough to influence other actors on a market; and that PP

can partly contribute to the international pressure in the cases of

undemocratic regimes and human rights violations. At the same time, we

already noticed certain legal difficulties with using PP to promote social

goods abroad (e.g Massachusetts law). Anyhow, we should keep in mind

that however useful the historic examples are, they are fundamentally

different from the objective of this thesis as these examples were addressing

particular situations or flaws in a domestic or international arena, while this

thesis will pursue PP regulations that would ensure respect for fundamental

ILO labour rights abroad.

2.3.3 From then to nowSo far we have viewed PP theoretically and through examples from the

perspective of human rights. But PP as we know it in current legislations is

very far from having a human rights perspective, since we generally speak

about a highly bureaucratized technical procedure, which serves a

fundamental purpose – to provide necessary services or goods to the public

bodies efficiently. By combining this with the factor of market economy, we

can outline the principles of modern PP.

The principles of PP that have been developed and emphasized through the

last decades such as transparency, good management, prevention of

corruption, effectiveness, efficiency, competition, integrity, accountability,

63 Massachusetts Burma Procurement Law Challenged at WTO, 1999. 30

fairness, etc.,64 interpreted in the framework of free market and trade rules,

leave us with a very rigid administrative procedure, which at a first sight

does not seem to be a very welcoming ground for human rights. Human

rights and environmental aspects are certainly not alien to PP, but their

coherency and balancing with principles mentioned above remains an open

question in legal debate.

It is quite obvious that it might turn out to be very difficult to effectively

include demands on labour standards to PP while at the same time

respecting the above mentioned principles. Some of the potential issues

prompted by the inclusion of labour rights into PP process are:

respect for rights at work as a criteria cannot be simply put into

numbers to be compared between the tenderers,

extensive supply chains are preventing effective control over respect

for rights,

companies operating in high risk countries would be more exposed,

elusive demand for respect for rights at work might open a window

of opportunity for corruption in PP procedure,

proving respect for rights at work might raise the costs of the

companies and consequently of the price of the product, so the

outcome of such responsible PP process might turn out to be not the

most economically advantageous tender

new demands would increase length and costs of a PP process as

well, etc.65

The development in PP in the recent decades has been based almost

exclusively on optimizing procedure with the purpose of ensuring its

maximum economic outcome and securing transparency and openness of

the procedure. As it is easy to outline some possible downsides of including

64 See generally: OECD, OECD Principles for Integrity in Public Procurement, 2009. United Nations Commission on International Trade Law, UNCITRAL Model Law on Public Procurement, 1.7.2011. Lynch, G., Public Procurement: Principles, Categories and Methods, e-read, 26.7.2013. Available at: https://leanpub.com/procurementintroduction/read, (25.3.2015).65 See generally: Martin-Ortega, O., Outhwaite, O., and Rook, W., Buying power and human rights in the supply chain: legal options for socially responsible public procurement of electronic goods, The Int. Journal of Human Rights, 2015. Vol. 19 no. 3, p. 341-368.

31

labour clauses in PP, it becomes clear that the main challenge will be how to

effectively combine them with the modern principles of PP in a way that

labour standards are respected as well as PP process maintains its efficiency,

transparency and fairness.

In this chapter we have established the link between PP and rights at work

and why we should pursue it, and what the possible challenges we might

encounter are. In the next chapter we will look into international legislation

(EU, WTO, ILO66) to see whether promotion and advancement of labour

rights in PP is possible within the current legislative framework.

66 ILO does not issue documents regulating PP, but as a major UN organization adopting international legislation and standards on work, its recommendations might offer a valuable counterbalance to economically driven EU and WTO legislation.

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3. International trade policies overtaking the regulation of public procurement

In the previous chapter we concluded that legislative developments in PP

during the last decades were aimed at securing fair and transparent

procedure. On international level, however, the emphasis has been on

ensuring openness of the market to foreign goods and services, that being on

regional (e.g. EU) or international level (WTO’s Plurilateral Agreement on

Government Procurement (GPA), ILO). Due to its significant size, US PP

will be dealt with as well in the following chapter.

In this chapter we will portray current international legislative framework

relevant to PP and try to identify provisions under which labour clauses

could transnationally ensure respect of rights at work and improve labour

standards. Indeed, actual and potential obstacles will be addressed.

At the end of the previous chapter we outlined the main challenge that we

will encounter throughout the investigation, i.e. balancing and reconciling

the principles of free trade and market competition on the one hand and

labour rights on the other. Nevertheless, the primary role of the EU and the

WTO, which both regulate PP, are economic/market related.67 Paving up the

way for labour clauses into such areas needs time and compromises what

following analysis intends to demonstrate. For the contrast, we will also

look at the ILO’s policy on labour clauses in public contracts.

3.1 The EU procurement legislationIn April 2014, the EU Parliament adopted new set of directives regulating

public spending, namely the Concession Directive on the award of

concession contracts,68 the Public Sector Directive69 and the Utilities

67 https://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr00_e.htm, (22.4.2015); and Consolidated version of the Treaty on the Functioning of the European Union. OJ 2008 C 115/47, 9.5.2008, (hereinafter ‘TFEU’). Art. 3.

68 Directive 2014/23/EU of the European Parliament and of the Council on the award of concession contracts.69 Directive 2014/24/EU of the European Parliament and of the Council on public procurement and repealing Directive 2004/18/EC.

33

Directive,70 which replaced the old set of directives from 2004.71 We will

only focus on the Public Sector Directive (hereinafter ‘the new Directive’),

which regulates PP.

As we noted above, the primary role of the EU is market related. The

purpose of PP regulation in the EU is thus to open up PP market in order to

secure four economic freedoms.72 However, such market freedoms have to

be considered in a wider perspective and therefore cannot be absolute.

Common EU policy goals are not just market-related and entail

sustainability, respect for human rights and social progress.73 Art. 138 of the

Treaty on the Functioning of the European Union (TFEU) stipulates that the

EU and the Member States should have as their objectives, amongst others,

improved living and working conditions, proper social protection, dialogue

between management and labour and combating of exclusion. Such

objectives should not be excluded from PP, which is one of the main

enforcement mechanisms of the common EU policy goals, and the new set

of directives is, as we will find out in this chapter, a step in a way of more

socially sustainable procurement. Recital n. 2 of the new directive even

classifies PP as a key role player in the Europe 2020 strategy.74

Quest for socially responsible PP in the EU (previously European

Community) is by no means a new idea, as these concepts were slowly

developing and with every new directive, more and more other aspects to

buying were included.75 Nevertheless, the main principle has remained the

70 Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sector and repealing Directive 2004/17/EC.71 Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors. Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (hereinafter ‘the old Directive’).72 Crown Commercial Service, A Brief Guide To The EU Public Contracts Directive, publication, 2015. Para. 3.1.Four economic freedoms being freedom movement of goods, services (Art. 49 and 56 TFEU), capital (Art. 63 TFEU) and workers (Art. 49 TFEU).73 TFEU, 2008. Preamble and Art. 8-11.74 European Commission, Europe 2020 Strategy for Smart, Sustainable and Inclusive Growth. Available at: http://ec.europa.eu/europe2020/index_en.htm, (10.6.2015).75 European Commission, Interpretative Communication 2001/C 333/08 of the Commission on the Community law applicable to public procurement and the possibilities for integrating social considerations into public procurement, 2011.

34

same – those other considerations cannot be such to endanger four market

freedoms (e.g. cause unequal treatment of economic operators). The same

principle goes for the PP contracts for which the directive do not apply (i.e.

are below the threshold set by the directive) – they are still subject to

transparency, equal treatment, non-discrimination, proportionality and the

principle of mutual recognition that derive directly from TFEU.76

However, we must also keep in mind that these market principles are not

static and are constant subject of change steered by political will, which is

enshrined in the evolving European and domestic case law, European

Commission communications, new and revised Public Contracts Directives

etc.77 Through such evolvement, social considerations have an opportunity

to expand. Of course, under the condition that political will for such

development exists.

In that view, a ten year period between the two directives should not be seen

as a homogenous era (in regard to PP principles), but as a constant playing

field of several interests trying to curb public spending in a way that would

support a certain goal or policy. By understanding this, it will come as less

of a surprise to see the substantial number of shifts and evolvements in the

interpretation of basic principles of PP which occurred in the last decade

within a single directive.

To give an example, which portrays such switches of principles that affect

human rights, we can look at the adoption of 2004 PP directive itself (and

reflected throughout the EU legislation), as it represented a move to a more

neo-liberal, free market thinking, whereas before, liberalization was limited

with other (social) considerations to a greater extent. Morton portrayed this

on an example of posted workers, which are often part of PP discussion as

Also Steurer, R., Berger, G., Konrad, A. and Martinuzzi, A., Sustainable Public Procurement in EU Member States: Overview of government initiatives and selected cases. Final Report to the EU High-Level Group on CSR, Vienna, October 2007.76 However, it is a discretion of Member States to apply the PP directive also to the purchases below the threshold, as Sweden did. Interview with Jörgen Hettne, 11.8.2015, Lund, Sweden.77 Crown Commercial Service, A Brief Guide To The EU Public Contracts Directive, publication, 2015. Para. 1.4.

35

freedom to provide services in the EU has skyrocketed transnational (though

within the single market) service provision, also as a part of PP.78

The ECJ followed this ‘neoliberal’ trend with a series of judgements (Laval,

Viking and most significantly Rüffert that concerns posted workers), which

supported above mentioned policy tendency. This has attracted numerous

critiques from academia and civil society, since market freedoms were given

a greater weight than social considerations.79 Due to the constant critique

and the ECJ’s unchanged practice, the European Commission was trying to

solve the issue of posted workers and finally managed to do so in 2014 with

enforcement directive,80 which is aligned with the new set of procurement

directives and is intended to advance the protection of posted workers and

better social protection in general. However, it remains problematic that a

court, established for the protection of principles of economic union, can

follow those principles so rigorously that social consideration becomes of a

secondary importance, even despite the fact the ECJ has previously

recognized European Social Charters81 as sources of the fundamental

78 Morton argued that after a switch of focus and priority from European Social Model to European Single Market, the effect of collective bargaining (amongst others) of posted workers was seriously undermined and thus their situation was significantly worsened (even compared to domestic workers doing the same job). The ECJ decided that imposing all domestic labour standards on posted workers under PP would be an impediment to (single) market access as foreign economic operators would lose their comparative advantage (low labour costs), but failed to recognize that unequal treatment of domestic companies, which had to adhere to a much stricter labour rules. Not to even mention the effect of dumping of labour standards within EU market.Morton, A., EU Reform of Transnational Posted Workers Law and the Place of Working Eights and Collective Agreements within the Single European Market, European Public Services Briefings 5. European Services Strategy Unit, 2013.See more in: Vinterskoug, J., The Scope of Labour Law Requirements in Public Procurement - at the ILO, EU and Swedish Level. Master Thesis, Lund University, 2011. Ch. 3.4.79 See, for example, Koukiadaki, A., The Far-Reaching Implications of the Laval Quartet: The Case of the UK Living Wage, Industrial Law Journal, 2014. Vol. 43 Issue 2, pp. 91-121; Syrpis, P., Reconciling Economic Freedoms and Social Rights - The Potential of Commission v Germany (Case C-271/08 Judgment of 15 July 2010). Industrial Law Journal, 2011. Vol. 40, p. 222-229; Barnard, C., A Proportionate Response to Proportionality in the Field of Collective Action, European Law Review, 2012. Vol. 37 no. 2, p. 117-135; Dølvik, J. E., and Visser, J., Free movement, equal treatment and workers’ rights: can the European Union solve its trilemma of fundamental principles?, Industrial Relations Journal, Blackwell Publishing Ltd., 2009. Vol. 40 No. 6, p.491–509.80 Directive 2014/67/EU of the European Parliament and of the Council of 15 May 2014 on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System.81 Council of Europe, European Social Charter, 18.10.1961, ETS 35; and Council of Europe, European Social Charter (Revised), 3.5.1996, ETS 163.

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principles of the EU law.82 Several scholars claim that had the same cases

appeared in front of European Court of Human Rights, the outcome would

have been quite the contrary.83

PP within the EU has thus far reaching economic and political impact, so

the future ECJ’s decisions will have to enshrine more commitment to social

sustainability. A step in that direction was already done by the Commission,

which included social (and environmental) consideration on several stages

of the new PP Directive.

EU has taken up the project of new procurement legislation for several

reasons: simplification of rules and procedures, achieving greater

accessibility of the European procurement market (especially for small and

medium enterprises), strategic usage of PP to achieve common EU policy

goals and ensuring sound procedures.84 Strategic usage of PP entails the

pursuit of environmental, social and economic objectives.85

Member States have two years (until 16 April 2016) to implement the

principles of the new directive in their national legislation.86 It is important

to understand that a directive creates an obligation to achieve results

outlined in it, but Member States have discretion to decide how they are

going to carry it out. However, one must not forget that these rules are

intended to have a harmonizing effect. According to Hettne, for

harmonising rules (i.e. common to all EU Member States) directives are

usually used. However, directives can be very different amongst each other

– some can lay down just general principles and therefore leave plenty of

operative freedom to Member States, and some are so detailed that there is

only little choice left.87 The new Directive falls closer to the latter, because it 82 Study on Precarious work and social rights Carried out for the European Commission, (VT/2010/084), Working Lives Research Institute, London Metropolitan University. Page 147.83 Syrpis, Reconciling Economic Freedoms and Social Rights - The Potential of Commission v Germany, 2011; and Barnard, A Proportionate Response to Proportionality in the Field of Collective Action, 2012, etc.84 European Commission, Green Paper on the modernisation of EU procurement policy; Towards a More Efficient European Procurement Market. COM(2011) 15 final, 27.01.2011.85 Ibid.86 This process is called transposition. Art. 90 of the new Directive.87 Hettne, J., Sustainable Public Procurement and the Single Market – Is There a Conflict of Interest? EPPPL 1, 2013.

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prescribes PP procedure in detail. Yet, we will see that it is also possible to

claim quite the contrary for the provisions relevant for our topic, as most of

them are of a voluntary nature.

Since the deadline for transposition is 2016, at the time of writing this it is

not clear how Member States will transpose articles that are relevant to the

purpose of this paper. Since this topic was not discussed extensively within

the academia so far,88 we will outline all the relevant provisions of the new

directive and compare them to provisions in the old directive and the

relevant case-law if necessary.89 The content of conducted interviews will

also be used. By using all these sources, we will get a better picture of the

extent to which labour rights could be enforced transnationally through the

EU legislation on PP.

Apart from the general provision on respect for labour rights (Art. 18(2)),

there are three main stages of PP procedure at which labour clauses could be

used – in technical specifications (requirements for tenders), by setting the

award criteria, and under contract performance specifications. We will look

into each stage separately.

3.1.1 Art. 18(2)First and perhaps the most important is Art. 18, which outlines the general

principles of PP for public authorities – treating economic operators equally

and without discrimination, and acting in transparent and proportionate

manner. Apart from the proportionality, these basic principles represent no

novelty, as they were the main guidance already in the old directive (Art. 2).

Adding proportionality might be the first indication of PP moving beyond

the sole consideration of economic aspects of a deal. Though Arrowsmith

noted that proportionality is a general principle of EU law and was not only

implied under the old directive, but often referred to in the ECJ’s

jurisprudence.90

88 Apart from few articles, which will be used and mentioned hereinafter.89 Though ECJ’s case-law relating to our topic is very scarce – searching ECJ’s database (CURIA) of last five years shows that cases concerning PP mainly deal with procedural aspects, assessment and rejection of tenders, clarification of award criteria, principle of equal treatment etc. None of those are fundamentally related to labour standards.90 Arrowsmith, S., The Law of Public and Utilities Procurement, 3rd edition, Sweet & Maxwell, 2014. Page 628, section 7-24.

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In the second paragraph the most promising provision for our cause follows:

“Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.”

Certainly, this provision is auspicious, as it implies an obligation to ensure

that labour and social law is respected in regard to the PP. We will analyse

this provision from the point of view of enforcing respect of labour rights

transnationally.

Apart from environmental standards, Annex X includes eight core ILO

conventions,91 therefore representing some kind of minimum that needs to

be respected. This significantly improves chances on the first part of our

quest – ensuring respect for labour laws in developing countries, but is not

as such is not appropriate for the second part of the objective of this thesis –

promotion of improvement of labour standards.92 Since the level of respect

for labour rights and standards in developing countries’ legislations is

typically very low, solely demanding their respect might not effectively

contribute to anything positive for the workers, if the national laws are

deficient from international perspective. In this sense Art. 18(2) is good for

creating a minimum common ground ensuring respect for core labour rights

based on ILO core conventions.

Furthermore, such provision is useful as it circumvents the inability or

unwillingness of developing state’s authorities (legislators, labour

inspectors, courts, etc.) to ensure respect for labour rights, as their respect is

demanded from the economic operator, without consideration whether the

authorities demand it and enforce it or not.

91 ILO Convention no. 111 Discrimination (Employment and Occupation), 1958; ILO Convention no. 29 on Forced Labour, 1930; ILO Convention no. 87 on Freedom of Association and Protection of the Right to Organize, 1948; ILO Convention no. 98 on Right to Organize and Collective Bargaining, 1949; ILO Convention no. 100, on Equal remuneration, 1951; ILO Convention no. 105 on Abolition of Forced Labour, 1957; ILO Convention no. 138 on Minimum Age Convention, 1973; ILO Convention no. 182 on Elimination of the Worst Forms of Child Labour, 1999.92 The aspect of improvement of labour standards will be more relevant for the following provisions.

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In theory, this equips purchasing authorities with a substantial operating

tool. We might say even more than a tool, as it lays out an obligation for

Member States to ensure that economic operators comply with applicable

rules. Unfortunately, in regard to practical enforcement of this provision, the

obstacles might be too difficult to overcome, at least for our purpose. First

of all, Art. 18(2) itself does not offer any guidance on responsibility for

respect for labour (and other) laws in the supply chain.93 The practical effect

of this provision might therefore not be great and the principle will remain

aspirational. Secondly, this provision (in its labour part) should not cause

difficulties within the EU, as the respect for rights in general is quite high

and the authorities of Member States have established channels of

communication, so finding out whether labour rights are respected by

certain economic operator might not be that demanding, whereas finding out

whether labour standards are respected in developing countries might turn

out to be extremely difficult.94 Furthermore, if we talk about products with

extensive supply chain and products that in some part traditionally involve

informal economy, we stumble across an insurmountable task.95

It might be possible to presume that this provision was mainly intended to

be used for services and not so much for goods, and more specifically, their

production. However, there is nothing in the text of the Article that would

prevent it to be read and used in that way. This is furthermore supported by

the logical reading of the text, as in the opposite way (not including goods)

we might stumble upon paradoxical situation, in which labour laws would

have to be respected in regard to services purchased through PP, but

purchased products could be produced e.g. by forced labour.

Additional potential complication that was insinuated above, is the problem

of practical transposition of this provision into national legislation. Art.

93 In contrary to the Guiding Principles on Business and Human Rights that specified in Principle 13 what business entities are responsible for in their supply chain. Whereas Art. 18(2) only talks about authorities making sure that the laws are respected. In this way, the issue of supply chains and outsourcing remains untouched.94 Furthermore, the availability of the information depends on the location – labour standards on fishing boats in Thailand or remote forests of Siberia are tougher to investigate and less likely to be supervised by the NGOs.95 Especially if we talk about certain industries, in which it is practically impossible to trace products down to the supply chain back to the raw materials (e.g. metals).

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18(2) solely imposes an obligation for Member State to ensure respect for

labour laws, but it does not give any instruction on how it should be done.96

If purchasing authorities or the economic operator have to check or prove

compliance, numerous problems would be encountered. PP officers’ lack of

knowledge about typical problems related to specific products, lengthy and

costly process, lack of staff, disinterest of economic operators to take part in

PP under such stringent conditions, economic operators might be

discouraged to participate at PP, as they would potentially need to adhere to

a much higher standard than on the market etc. are just some of them.97 Not

to mention that in practice this would result in achieving exactly the

opposite effect regarding one of the purposes of the new Directive –

simplification of rules and procedures.98

Last but not least, we cannot overlook the position of this obligation within

the Directive – it is placed in the same article as the main principles of PP,

which certainly expresses its importance and emphasis. Placing it among

general articles also indicates that respect for labour law cannot be limited to

certain level or aspect of PP, but can be evoked at any point. This is the only

way that human rights in general can achieve effectiveness – embedding

them into principles at the highest level means that these principles will

have to be enshrined and confirmed in every matter related to the subject.

However, not everyone is of the opinion that respect for labour, social and

environmental standards belong to article on general principles of PP.

Arrowsmith mentions that such provision has the character of more of a rule

than of a general principle, which could be used for interpretation and

development of the Directive. 99 But such stand has not been supported by

the European Commission, which has confirmed in several documents that

PP should be used to achieve horizontal goals.100 If PP is to be used for 96 This is understandable, since this is a directive, which only creates on obligation to achieve a given result, but not on the means of accomplishing it.97 See more on this in: Martin-Ortega, Buying power and human rights in the supply chain: legal options for socially responsible public procurement of electronic goods, 2015. More about practical issues will also be explained in the last chapter through examples.98 See also Semple, A., The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?, European Law Conference at University of Oslo, 2014.

99 Arrowsmith, The Law of Public and Utilities Procurement, 2014. Page 628, section 7-29. 100 European Commission, Green Paper on the modernisation of EU procurement policy; Towards a More Efficient European Procurement Market, 2011. Pages 3-5.

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achievement of common societal goals, it only seems rational to include

respect for social, labour and environmental laws to the level of the very

basic principles of PP, in order to secure their position as one of such.

Corresponding to Art. 18(2), which creates an obligation, are Articles 56

and 57, which outline the grounds for the exclusion of economic operators

due to the failures on their behalf. We will analyse it under contract award

criteria section.

3.1.2 Technical specificationsTechnical specifications lay down specifications required of a product (or

service).101 It is necessary for technical specifications to be linked to the

subject-matter of a contract and proportionate to its value and its

objectives.102 This is the first stage where we encounter the concept of the

link to the subject-matter, the concept which was only included in technical

specifications and the award criteria in the old Directive, but was expanded

to the other stages of PP in the new Directive. The link to the subject-matter

of the contract had limiting effect for social considerations in the old

Directive,103 so applying this condition to other stages could have negative

consequences for enforcement of labour standards through PP. It mostly

depends on how wide the scope of the link to the subject-matter is

interpreted.

The old Directive outlined rules regarding technical specifications in Art. 23

whose text does not offer much ground for setting ethical requirements

under technical specifications.104 Nevertheless, the possibilities have been

expanded, which is obvious not only from the text of the new Directive, but

Also: Communication of the Commission, The Europe 2020 strategy for smart, sustainable and inclusive growth, 2010.101 Art. 42 of the new Directive.102 Ibid.103 Semple, The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?, 2014.104 In the Max Havelaar case, the ECJ noted that fair trade criteria “do not correspond to the definition of the concept of technical specification […] given that that definition applies exclusively to the characteristics of the products themselves, their manufacture, packaging or use, and not to the conditions under which the supplier acquired them from the manufacturer” (paras. 73 and 74). In the ECJ’s view, compliance with those criteria “does fall under the concept of ‘conditions for performance of contracts’ within the meaning of Article 26 of that directive” (para. 75). Case C-368/10, European Commission v. Kingdom of the Netherlands. (‘Max Havelaar case’).

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also from ECJ’s jurisdiction. From 1999 Concordia case, in which ECJ was

considering whether noise and gas emission requirements are linked to the

subject-matter of the contract related to public transport, and all the way to

the so called Max Havelaar case in 2012, in which the Court established that

criteria of a fair-trade label (or certificate) could be used as conditions for

performance of contracts105 - the expansion in the interpretation of the link

to the subject matter is evident. This case was enshrined in the Art. 43 of the

new Directive on labels, which gives the authorities the option to require

specific label as means of proof that the product (or works) satisfy certain

environmental, social or other characteristics. Moreover, such demands can

be required within technical specifications, the award criteria or the contract

performance conditions.106 In general, the process and tools of

standardization should also be used more on the level of social and labour

standards.107 Nevertheless, it is “a key instrument for consolidating the

Single Market and facilitating cross-border trade.”108 However, we cannot

ignore the fact that social standards109 are much more complex to develop,

keep up with, and monitor than technical ones. We also cannot forget the

principle that the ECJ laid out in the Max Haavelar case, specifically

demanding that social certificates/standards have to be specific and cannot

simply refer to socially responsible conduct of the economic operator in

general.110 This means that simply referring to or demonstrating systematic

general human rights due diligence (in the terms of UN Guiding Principles

on Business and Human Rights) in the company’s processes cannot be

applied in technical specifications.

105 Ibid. Para. 94.106 Art. 43 of the new Directive.107 Standardization could contribute greatly to simplification of PP processes, as it would secure a common approach and benchmarks, as well as equal treatment. Governments are also likely to accept internationally established standards. For PP, such document might be forthcoming standard on Sustainable Purchasing of the International Organization for Standardization, ISO/CD 20400. See more at: http://www.iso.org/iso/home/news_index/news_archive/news.htm?refid=Ref1873, (5.7.2015).108 https://www.cen.eu/you/EuropeanStandardization/Pages/default.aspx, (2.5.2015).109 The example of social standard is ISO 26000 of the International Organization for Standardization, which provides guidance on how business operators can operate is socially responsible way. More at: http://www.iso.org/iso/home/standards/iso26000.htm, (2.5.2015).110 Supra n. 104. See more at: http://gavclaw.com/2012/06/27/use-of-fair-trade-labels-in-procurement-decisions-court-of-justice-of-the-eu-in-max-havelaar/, (2.5.2015).

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The expansion of the link to the subject-matter of the contract to other

stages has another consequence according to Semple – technical

specifications are still more stringent and tightly regulated than the award

criteria and contract performance clauses, which means that those are more

appropriate for enforcing minimum standards as the authorities are obliged

to reject tenders that do not comply with them, whereas other two stages

offer more operating space for the authorities and therefore being more

appropriate for targeting the best possible option (i.e. going beyond the

minimum requirements).111 In terms of our quest of promotion and

advancement of labour rights, technical specifications are more appropriate

for requirements of minimum standards (therefore enforcement of minimal

labour rights), whereas award criteria could be convenient for awarding a

contract to a tenderer with higher standards (therefore advancement of

standards in rights at work). Though the ECJ might not find such

explanation in accordance with the principles of single market, as the

Rüffert case demonstrated.112

For that reason, the usage of labels is restricted with five conditions that a

label needs to fulfil in a specific case:

“(a) the label requirements only concern criteria which are linked to the subject-matter of the contract and are appropriate to define characteristics of the works, supplies or services that are the subject-matter of the contract;

(b) the label requirements are based on objectively verifiable and non-discriminatory criteria;

(c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations, may participate;

(d) the labels are accessible to all interested parties;

(e) the label requirements are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence.”113

111 Semple, The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?, 2014.112 The ECJ basically denied public authorities to demand salaries higher than minimal ones for posted workers working on public contracts, since this would nullify the comparative advantage of foreign economic operators – their low costs. Such reasoning might protect single market freedoms, but at the same time effectively creates a ceiling for progress of social rights in connection to public contracts. C-346/06 Dirk Rüffert v Land Niedersachsen. More at: http://www.etuc.org/r%C3%BCffert-case-judgment-summary, (27.4.2015).113 Art. 43 of the new Directive.

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These conditions effectively prevent authorities to use a general CSR policy

of the economic operator as a consideration, because only facts relevant to

the specific product are to be considered (link to the subject-matter of the

contract). In practice this might create problems, since many certificates

indicate general nature of conducting business at organizational level114 and

do not necessarily define characteristics of specific products.115

Further problem with using social labels could be their (non)widespread

presence. A domestic court in the Netherlands (in the case of Douve

Egberts, which we know at the ECJ as a Max Havelaar case) allowed such

certification as a requirement, because it was easily applied without

discrimination, since there were numerous domestic and foreign suppliers

that had the relevant certification.116 The consequence of such reasoning is

that non-discrimination is still likely to have the advantage and in the case

that only very small number of economic operators could be able to satisfy

certain social certification, it might not be applied for certain public contract

due to its discriminatory effect. Consequently, standards would have to be

lowered to ensure possibility for widespread participation and economic

operators applying lower social standards would be awarded for their low

standards with the possibility to participate. PP should serve as a field for

promoting best practices on horizontal level, but such domination of free

trade principles does not serve such goal; quite the contrary, it can oppose it.

3.1.3 Contract award criteriaAmong the tenders which satisfy technical specifications (and other

requirements under the Directive), the contracting authority will chose an

offer based on the determination of ‘the most economically advantageous

tender (hereinafter MEAT) from the point of view of the contracting

authority.’117 MEAT is

114 Semple, The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?, 2014.115 E.g. Fairtrade Labelling Organizations International, Equal Exchange, Ethical Trading Initiative, Ethical Tea Partnership, etc.116 Thrasher, R., On Fairness and Freedom: The WTO and Ethical Sourcing Initiative. GEGI Working Paper Series, Global Economic Governance Initiative, 2014.117 Art. 67 of the new Directive.

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“…identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing in accordance with Article 68, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question.”118

The old Directive had two options as the contracting authority also could

have decided to base the award solely on the lowest price criteria.119 This

development is in line with intended sustainable aspect of the Directive as

deciding solely based on the lowest price is outdated.120 Nevertheless,

Arrowsmith argues that the lowest price criteria has only been removed

from the new Directive superficially, as the phase MEAT now covers “both

awards that include non-price criteria and awards that are based solely on

price.”121

‘MEAT from the point of view of the contracting authority’ involved

several criteria (incl. environmental) in the old Directive, but not the social

one,122 which is included in the new Directive though. Arrowsmith,

however, noted that a list of criteria that might be used is ‘purely

illustrative.’123 In any case, the use of social and environmental criteria for

the award of contracts is entirely voluntary for contracting authorities.124

In general, the ECJ allowed social considerations as criteria for the award of

public contract, but only as long as they do not create barriers to free

movement (four economic freedoms).125 If the ECJ will maintain the same

standard, the usage of social considerations would still be very limited, as

was demonstrated above in regard to Rüffert case.

118 Thrasher, On Fairness and Freedom: The WTO and Ethical Sourcing Initiative, 2014. Art. 67 of the new Directive.119 Art. 53 of the old Directive.120 Based on the fact that other costs, such as social or environmental, are not counted in price.121 Arrowsmith, The Law of Public and Utilities Procurement, 2014. Page 737, section 7-168.122 However, it was included in the recital 46 of the preamble to the old Directive. See also: Opinion of Advocate General Kokott delivered on 15 December 2011. Case C-368/10, European Commission v Kingdom of the Netherlands. Para. 85.123 Supra n.121.124 Semple, The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?, 2014.125 Bercusson, B., European Labour Law, 2nd edition, Cambridge University Press, 2009. P. 431.

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As noted above, in the new Directive contract award criteria is additionally

limited with the link to the subject-matter requirement. Whether this poses a

significant impediment to inclusion of labour clauses is dependent on how

wide the interpretation of link to subject-matter of the contract is. Recital 97

gives guidance for these criteria to be:

“... in any respect and at any stage of their life cycles from extraction of raw materials for the product to the stage of disposal of the product, including factors involved in the specific process of production, provision or trading and its conditions of those works, supplies or services or a specific process during a later stage of their life cycle, even where such factors do not form part of their material substance.”

This clearly settles the above mentioned notion that the ECJ accepted in the

Max Haveelar case. The Court approved that specific fair trade compliance

can be a valid criteria.126 By this, the legislator has also denied the view that

the Commission had at certain point – that such (social) criteria can be used

as deciding award criteria only when tenders are otherwise equal.127

Further point that opens up the possibilities in regard to goods is addition

“any stage of life cycle,” as it emphasizes that the entire life process of

goods is applicable, no matter the number of stages and legal segmentation

of a supply chain. It also poses no restraints to the location, which

significantly improves possibilities to demand respect for labour standards

outside of the EU.128

Another potentially useful, and yet mostly overlooked aspect, is the addition

to the MEAT criteria of the clarification that it has to be evaluated from ‘the

point of view of the contracting authority’, which could be read as balancing

the economic aspect of the PP since public authorities have overall wider

societal objectives and their choice of economic operator based on this view

might be different. However, deciding based on such a loose and unclear

factor would also signify a certain level of arbitrariness and non-

126 That consequently means that a general CSR policy and commitment of the economic operator cannot be an award criteria, as it is not sufficiently linked to the subject matter. Note, however, that in Max Havelaar case fair trade compliance was accepted as a contract performance condition.127 Arrowsmith, The Law of Public and Utilities Procurement, 2014. Page 746, section 7-178.128 At this point the actual achievability of respect for labour standards in developing countries through PP is not debated, but only legal possibility to apply such criteria.

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transparency, which is inconsistent with basic principles of (European) PP

and is addressed in Art. 67(4).

3.1.3.1 Exclusion of tenders and participants

In Art. 56, which lays out general principles of award of contracts, there is

an option for contracting authorities not to award a contract to a tenderer

submitting the MEAT where they have established that tender does not

comply with the applicable obligations referred to in Art. 18(2). It is not

clear what exactly ‘establish’ entails.

Part of qualitative selection of tenders is also exclusion of certain economic

operators from participation, based on the grounds outlined in Art. 57,

which concern past or present situation or actions of the economic

operators.129 This article offers the main enforcement tool for the general

provision on respect for labour rights (Art. 18(2)). Art. 57 in the first

paragraph lays out circumstances under which economic operator shall be

excluded from the participation. One of such circumstances is when

authorities have established, by verifying in accordance with Articles 59, 60

and 61 or are otherwise aware of a conviction of economic operator by final

judgment for child labour and other forms of trafficking in human beings. In

the second paragraph of Art. 57 the circumstances under which an economic

operator may be excluded from the participation are laid out. One of the

options is when the contracting authority can demonstrate by any

appropriate means a violation of applicable obligations referred to in Article

18(2). By this, the obligatory nature of Art. 18(2) is somehow diminished,

which has already drawn some criticism.130 Art. 18(2) expresses a necessity,

an obligation for labour standards to be respected, but Art. 57 does not

express an obligation to exclude violators and only gives an option to do so.

This might eventually lead to unequal practice within the EU, as some

countries that are more advanced in sustainable PP could apply stricter use

of exclusion of tenderers based on labour law violations, while some

countries would not use it at all.

129 Semple, The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?, 2014.130 Ibid. See also: European Trade Union Confederation, ETUC Key Points for the Transposition of the Directive 2014/24/EU, ETUC Publication, 2014.

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Further point of this article that diminishes its effectiveness for protection of

labour rights is the fact that for the first paragraph, conviction or other proof

from official records is needed (Art. 60). Among authorities of the EU

Member States such exchange of information should not be problematic, but

with third countries, especially developing, this could be an issue.

Furthermore, in practice we will hardly find European companies that have

been accused of using child labour or of human trafficking as it is more

likely that they are connected to such unlawful practices through their

transnational supply chain. Due to separate legal personalities, economic

operators bidding for EU tenders are not themselves convicted and therefore

cannot be excluded for such connections based on this article. Second

paragraph that offers a possibility for an economic operator to be excluded

for violations of Art. 18(2) has a less strict condition, as the contracting

authority only has to “demonstrate [the violation] by an appropriate means”.

What exactly could ‘appropriate means’ be remains unclear. E.g. is

internationally published report by a local NGO on labour violations in a

country where labour inspection and judicial system are inadequate

appropriate means? What about findings of non-judicial grievance

mechanisms, such as OECD’s National Contact Points;131 or perhaps

national human rights institutions? The points made offer extensive grounds

for consideration and it is likely that the ECJ will have to specify

‘appropriate means’ if challenged.

A quick comparison of Articles 56 and 57 demonstrates that Art. 56 talks

about exclusion of a tender, if established that it does not comply with

obligations from Art. 18(2), whereas Art. 57 talks about exclusion of

participants due to their past or present actions. First observation of this

difference is that grounds for exclusion of participants are not necessarily

linked to the subject-matter of the contract, which means that a window for

addressing potential violations of labour law is wider. But on the other hand,

as we mentioned above, since our aim is to tackle violations in developing

countries outside of the EU, the effectiveness of this provision is diminished

by legal reasons as violations were very likely conducted by suppliers at the 131 See more about National Contact Points at: http://www.oecd.org/investment/mne/ncps.htm, (12.9.2015).

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lower levels of supply chains, for what economic operator/bidder in Europe

cannot be held responsible.132 In that way, Art. 56 that is connected to the

tender (therefore the product) could be able to avoid the issue of separate

legal personality, as the exclusion ground is linked to the subject-matter of

the contract, independent of the economic operator.

Both options have its pros and cons, but we have to keep in mind that

legislators, when drafting these articles, were most likely mainly trying to

secure fair competition within the EU and that lower labour standards, their

respect or their enforcement in some Member States would not cause social

dumping; whereas the issue of violations of basic labour standards down the

supply chains remained inadequately addressed.133 We must note that the

new or old Directive nowhere explicitly excludes clauses concerning social

and labour standards from applying to commercial goods, which is in

contrary to the ILO and the US federal regulation of PP, which we will see

in the following sections. However, nothing in the text of the Directive

prevents us from applying these provisions to the situation of

products/goods partly or entirely originating outside of the EU. The ECJ

will sooner or later have to come up with answers on how to address

violations of core labour rights throughout the supply chain of products that

are competing for public contracts.

3.1.3.2 Abnormally low tenders

Another relevant provision concerns abnormally low tenders, for which

contracting authorities could require economic operators to explain the price

or costs and consequently reject them.134 The explanation of price or costs

may in particular relate to compliance with obligations referred to in Art.

18(2).135 If the contracting authority have after the assessment of

information established that the tender is abnormally low because it does not

comply with obligations from Art. 18(2), it shall reject the tender.136 This

132 At least not strictly legally looking. However, it would be interesting to see practical implications of implementing responsibility for causing-contributing-linkage to human rights violations from the UN Guiding Principles on Business and Human Rights.133 Which is a wider legal problem and not just one concerning PP.134 Art. 69 of the new Directive.135 Art. 69(2.d)136 Art. 68(3).

50

provision is one of the most substantial advancements from the old

Directive, as it basically creates an obligation for contracting authorities to

reject an abnormally low tender in cases where the contracting authority

establishes that price or costs is so low due to failure to comply with

national legislation or international labour law provision.137

Yet, such obligation for contracting authorities arises only when they find

that low price is due to violations of labour rights.138 The question is whether

in day-to-day business public officers will be willing to investigate in order

to establish reasons for low price. An opportunity to reject abnormally low

tenders due to violations of international labour laws could be very useful

for our purpose, though strong practical impediments are probable. Not just

whether public officers will be willing to investigate the background of the

price or costs, but also are they able and equipped to do so. In order to

assess what an abnormally low price for specific product is, public official

running the procedure needs to have certain prior knowledge of the product

market, the process of its production, typical places of production, the origin

of materials etc. Furthermore, solely the final price itself, which is a factor

of deciding whether economic operator should provide explanation about it,

may not tell much about standard of and respect for labour rights. Prices of

tenders among two participants can, for example, be practically the same,

but the labour standards under which these products were produced might

have been very different. Therefore the concept of abnormally low tenders

might not be applied as price cannot be reliable and sole factor for

evaluating respect for rights at work.139

3.1.4 Contract performance specifications (disclosure of subcontractors)

Further stage of PP process, in which labour clauses can be enforced, is

contract performance specifications. On this stage, the economic operator

has been chosen and contract performance specifications lay out the 137 Van Der Abeele, E., Integrating Social and Environmental Dimensions in Public Procurement: One Small Step for the Internal Market, One Giant Leap for the EU?, European Trade Union Institute (ETUI), 2014. Page 19.138 Ibid.139 Of course, practice of a company might be scrutinized under other provisions of the new Directive, but under Art. 69 it might remain undiscovered.

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conditions linked to the subject-matter, under which the contract has to be

fulfilled. Art. 70 specifically mentions that these conditions can include

social or employment-related considerations. Interestingly, the scope of this

provision is narrower in relation to the old Directive, as the latter also

allowed the possibility to include social considerations, but without the link

to the subject-matter of the contract, which means that social clauses could

have been wider than under the new Directive.140 Again, we can assume that

this provision was intended for procurement of services, since those are

about to happen after the contract was signed, whereas good were usually,

though not necessarily, produced prior and irrespectively to the outcome of

specific PP.141

Another important provision regulates subcontracting which is very relevant

to the purpose of this thesis. Art. 71 states that observance of the compliance

with Art. 18(2) by subcontractors is ensured through competent national

authorities. This is a normal standard regarding rights at work and it more or

less works properly in the EU, but in our case of developing countries the

system of inspection and enforcement might not function adequately

However, even if the contracting authority might not be able to exercise

control over the place of performance of the contract, this does not in any

way diminish application of the relevant legislation.142 This provision

certainly clarifies that observance of Art. 18(2) is a strict obligation in

subcontracting,143 no matter the geographical, operational or legal situation

of the subcontractor. The second paragraph gives a possibility to a

contracting authority to require of the tenderer to indicate whether he plans

140 Art. 26 of the old Directive. However, Attorney General Kokott in Max Havelaar case noted that he agrees with the Commission that Article 26 of Directive 2004/18 does not permit the contracting authority to exercise unlimited influence over the purchasing policy of its future contractor. Its requirements in respect of that purchasing policy must relate specifically to the subject-matter of the public supply contract. Opinion of Advocate General Kokott delivered on 15 December 2011. Case C-368/10, European Commission v Kingdom of the Netherlands. Para. 76-81.141 Unless we speak about products that have been produced specifically for a public contract. For example, ILO and US procurement provisions related to social and labour matters cover only such products. See the relevant chapters.142 Van Der Abeele, Integrating Social and Environmental Dimensions in Public Procurement: One Small Step for the Internal Market, One Giant Leap for the EU?, 2014. Page 20.143 Ibid.

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to subcontract any part of the contract to third parties and give their names

(or suggestions).

Again, this article seems to be written for the purpose of providing services

or at least producing products for a specific tender – paragraph 2 grants an

option to a Member State or a contracting party to ask a tenderer to disclose

any intended subcontracting, which clearly implies for an object of the

contract to be performed or produced in the future. Commercial products

(like electronics or food) are typically produced beforehand, so tenderers

should be able to provide entire list of subcontractors in advance anyway.

Paragraphs 6, 7 and 8 do offer some discretion to Member States in how

they can avoid breaches of the obligations referred to in the Article 18(2),

but they are of a nature that clearly presupposes that are both the main

contractor and subcontractor situated in Member States, which does not

apply to the case of generically produced goods with extensive supply

chains outside of the EU.

3.1.5 The outcomes of the new DirectiveIt is too early to talk about the effects of the new Directive on enforcement

and advancement of labour rights. By comparing the new and the old

Directive it is clear that more tools of social nature were added, or better to

say, the possibility to use such tools has expanded, though it remains

uncertain to what extent they will actually be applied in national legislations

and later in practice.

First of all, respect for and advancement of labour rights in PP depends on

transposition into national legislations of the Member States. We need to

draw a distinction between the general Art. 18(2), which is the only one that

is obligatory, and other provisions on different stages of a PP process, which

merely give an opportunity to use labour standards as one of the

specifications, criteria, conditions etc. The functions of Art. 18(2) and other

provisions are therefore very different. Art. 18(2) creates overall obligation

for Member States to ensure respect for labour legislation during the

performance of the contract that is independent from the process of

evaluating and choosing tenders, in which labour standards can be one of

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the factors. It the terms of the purpose of this thesis, Art. 18(2) could

accommodate the compliance part (respect for minimal labour standards –

the eight core ILO conventions) and the other provisions could contribute to

improvement of labour standards in developing countries by i.e. granting a

public contract to the economic operator with better standards (and not just

the minimal ones, which would be guaranteed by Art. 18(2)). However, as

we noted above, Art. 18(2) does not offer any specification on the

responsibility scheme and in practice the issue of global supply chains

remains unsolved under this article.

As demonstrated above, all mentioned provisions, except for Art. 18(2), are

of a voluntary nature, at least in the social consideration part. This means

that transposition could go either way – social considerations being fully

implemented or entirely overlooked. It is reasonable to predict that the

transposition will not be extreme in either direction, but will take a moderate

approach, depending on a political will.144

However, a mere transposition of labour law related optional provisions into

national legislation itself does not secure its effective use. Public authorities

have to use these options and this depends greatly on political will, but also

on the awareness and knowledge of the purchasing authorities.145 This is an

area where the European Commission could contribute to with promotional

and cohesive activities.146 Practical aspects of socially sustainable PP will be

discussed more in detail in the last chapter.

144 UK Government was the first to introduce new PP legislation in March 2015, which attracted loads of criticism due to its minimal involvement of social and environmental criteria. The Government rather chose a minimal-regulation approach with the emphasis on a price. It is likely that the law was passed so quickly (a year before the deadline in April 2016) due to upcoming General elections in the UK a month later. See more at: Public Dykes, M., Contracts Regulations: Government getting it badly wrong on public procurement, blog. http://touchstoneblog.org.uk/2015/03/public-contracts-regulations-government-getting-it-badly-wrong-on-public-procurement/, (14.7.2015).Roche, A., Why we must put the new Public Procurement Regulations on hold. http://leftfootforward.org/2015/02/why-we-must-put-the-new-public-procurement-regulations-on-hold/, (14.7.2015). The law (The Public Contracts Regulation 2015) is available at: http://www.legislation.gov.uk/uksi/2015/102/contents/made, (14.7.2015).145 Practical aspects of inclusion of social considerations into PP on a national level will be dealt with in the last chapter. 146 The Commission has already issued documents on sustainable PP under the old Directive. See: European Commission, Buying Social, A guide on taking account of social considerations in public procurement, 2011.

54

Since socially sustainable PP has until now mostly been “backed by a

number of initiatives on the regional and local levels,”147 the differences in

practical (non)implementation of labour clauses within and among Member

States are vast. As most of such provisions in the new Directive are of a

voluntary nature, it is possible that differences between States or particular

purchasing authorities will remain big or even expand. Member States or the

authorities that already make efforts in this field will be able to strengthen

their processes under the new Directive, but those States or purchasing

authorities, which do little or nothing will be pretty much able to continue to

do so under the new Directive, since they do not need to apply voluntary-

natured social considerations.

Lastly, we should not overlook the role that the ECJ will have for

effectiveness and a scope of labour related provisions. The ECJ will have to

consider all aspects, functions and general principles of the new Directive.

One of the problematic areas could be the fact that most of socially related

provisions complicate and slow down the PP process, which is a directly

opposite effect to the one that the new Directive tries to achieve (amongst

others) – a more simple and faster process. The ECJ will probably have to

balance these opposing goals/effects.

Further aspect that the ECJ will have to balance is forever present “clash”

between economic freedoms and social rights, which has been a constant

unavoidable subject of the Court’s judgements. Since the Commission has

sent numerous messages of importance of social considerations for

sustainable development, we can anticipate that the Court will endorse this

view and balance the two more wisely. Nevertheless, a consensus that

sustainable PP does not limit free market/trade and allow social rights to be

an important factor in PP is rapidly growing in the international, national

and local levels and the Court cannot remain detached from these

developments.148 Hettne is actually of the opinion that the truly challenging

147 Kahlenborn, W., Moser, C., Frijdal, J. and Essig, M., Strategic Use of Public Procurement in Europe, Final Report to the European Commission MARKT/2010/02/C. Adelphi, 2011.148 ILO, Summary Report, 2014 Interagency Roundtable on CSR, Sustainable public procurement as a tool for promoting responsible business, 19 November 2014, Geneva.

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cases that would force the Court to consider the impact of economic

freedoms on labour and other social rights are yet to come.149

3.2 World Trade Organization’s General Procurement Agreement

Further international regulation of PP has been created within the WTO –

Agreement on Government Procurement (GPA), which is in fact the only

supranational regulation of PP.150 GPA is a plurilateral agreement, which

means that the accession to GPA is voluntary and not linked to the accession

to the WTO. Its purpose is to secure “open, fair and transparent conditions

of competition in the government procurement markets.”151 However, it

does not lay out detailed rules on the procedure, but rather provides a

framework to impede discrimination of economic operators based on their

nationality and to foster transparency.152 All EU Member States signed the

GPA, which means that both the EU directive and the GPA simultaneously

apply to PP situations in EU Member States.153 Apart from the EU Member

States, there are only 14 signatories of the agreement, majority of which are

countries with developed economies.154 This short section will, similarly as

the EU chapter, explore to what extent labour or social clauses can be used

within the GPA framework.

The role of the GPA is, naturally, to secure the free trade in public

purchasing. The new, revised GPA came out in 2014 and did indeed follow

some recent trends by including few non-economic considerations.

Unfortunately, they are far below the standard that was set by the new EU

Directive. Of course, we cannot ignore the fact that the EU directives

regulate a very specific market/area, where social sustainability is not

149 Interview with Jörgen Hettne, 11.8.2015, Lund, Sweden.150 WTO, Agreement on Government Procurement, GPA/W/313, 16.10.2010.151 See: https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm, (9.5.2015).152 Tosoni, L., The Impact of the Revised WTO Government Procurement Agreement on the EU Procurement Rules from a Sustainability Perspective, European Public Private Partnership Law Review, 2013. Issue 1, pp. 41-48.153 Of course, for the cases in which applicable thresholds are met. Thresholds of the GPA are higher than of the new EU directive, so not all public purchases that fall under EU regulation are bound by the GPA.154 List of signatories available at: https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm, (12.5.2015).

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exactly a novelty, whereas the GPA is a global instrument that has to take

into consideration different levels of development and types of public

purchasing in which social and even environmental aspect might not exist.

However, this should not prevent the document to entail at least a possibility

for such consideration, or even worse, to prevent such consideration in the

name of the lowest bid and/or efficiency.

The first provision that could potentially be of relevance for our cause is a

general exception in Art. III.2(b) which provides that “…nothing in this

Agreement shall be construed to prevent any Party from imposing or

enforcing measures (...) b. Necessary to protect human, animal or plant life

or health.” This provision is certainly powerful, but at the same time hardly

plausible for promotion of core labour standards, because necessity is

legally very demanding level to adhere to, especially since there is likely

that less trade-restrictive means of achieving social goals exist.155 However,

some authors did try to explain this in the wide framework of the WTO or

even international law. Tosoni argues that many provisions contained in the

wider legal framework allow or even impose non-restrictive interpretation

of the GPA rules.156 In that fashion, the very first paragraph of the preamble

of the Marrakesh Agreement,157 which concerns also the GPA, states that

Parties to the agreement recognize

“... that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, ...”158

However, one might notice a certain level of inconsistency of such

statements by the WTO, which are compatible with global policy trends,159

but are somehow overlooked on the level of legal documents like the GPA.

Such documents could and should offer practical solutions to support the

155 Thrasher, R., On Fairness and Freedom: The WTO and Ethical Sourcing Initiatives . GEGI Working Paper Series, paper 4. Global Economic Governance Initiative, 2014.156 Tosoni, The Impact of the Revised WTO Government Procurement Agreement on the EU Procurement Rules from a Sustainability Perspective, 2013.157 WTO (Marrakesh) Agreement Establishing the World Trade Organization, 1867 UNTS 154, Apr. 15, 1994.158 Ibid.159 See Chapter 2.

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pursuit for sustainable development. Anyway, the revised GPA lacks such

practical provisions or options. Therefore making a legal reasoning which is

justified solely on the aspirations of the preamble establishing the

international organisation is weak and unlikely to serve its intent.

Kaufmann, on the other hand, tried to argue that the GPA might allow

human rights clauses in PP already under the old GPA, which allowed

exceptions to the rules if it was necessary for the protection of public

morals, order or safety.160 She contests that due to the relatively consistent

international practice on the content of the public order (referring to the

international human rights), state could justify unilateral measures in the

interest of public order if the measure are based on international human

rights law. Furthermore, part of public order is also states ensuring

regulatory consistency within its territory. “If a state is a party to

international human rights treaties, importing goods that are produced in

violation of these treaties would undermine the domestic legal order and

ridicule the democratic Rechtsstaat.”161 Despite running into the obstacle of

necessity that is a condition for such exemptions, the author sees a potential

in using proportionality test. Of course, strict scrutiny of such test would

prevent protectionist measures to be used, but there would still be relatively

broad margin of discretion in the pursuit of human rights policies.162 “Such

approach would not only reflect the basic philosophy of the GPA to

concentrate on governmental procurement policies that threaten

international trade, but also acknowledge the authority of national

governments to determine the level of social and human rights policies for

their countries in compliance with international law.”163

Second provision that is potentially connected to social causes is Art.

II.3(e), which excludes PP that is linked to international development

assistance, including international development aid, from the scope of the

GPA. The purpose of this thesis is to seek tools that would secure respect

for core labour rights or even promote their improvement and this should be 160 Kaufmann, C., et al., Globalisation and labour rights: the conflict between core labour rights and international economic law. United States Institute of Peace Press, 2007.161 Ibid.162 Ibid.163 Ibid.

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the norm for every single public purchase if we want to achieve sustainable

outcome. Thus such policies cannot be successfully pursued under the title

of charity and development aid.

We will continue with couple of more provisions that do not directly

mention social aspects, but are of certain relevance to them. Under technical

specifications governments are allowed to include specifications for

environmental protection (Art. X.6), but there is no mentioning of labour

specifications at all. If we consider this from the perspective of the

development of corporate responsibility and governments’ actions in this

area, inclusion of environmental specifications can be seen as a stepping

stone towards social factors in the next edition of the GPA, as

environmental considerations were typically implemented before the social

ones.164

A significant impediment to using labour clauses in PP is Art. VIII, which

lays out conditions of participation and says that:

“A procuring entity shall limit any conditions for participation in a procurement to those that are essential to ensure that a supplier has the legal and financial capacities and the commercial and technical abilities to undertake the relevant procurement.”

This provision somehow brings us to the core of the problem – the WTO’s

regulation of PP is trying to achieve transparency and non-discrimination

among the members and by no means will we argue that such pursuit is

faulty. However, the mechanisms of achieving it do become faulty if they

are of such nature that they exclude all other considerations, even the ones

that might come higher on a scale of values of humanity and justice, which

are outlined in the basic international treaties and, nevertheless, in the above

mentioned first paragraph of the Marrakesh Agreement. This suggests that

we again embarked upon a dilemma of open market vs. labour rights, in

which including conditions related to labour (or social) rights into public

procurement might be deemed as an obstacle to international trade as levels

of respect for those rights differ greatly among states.

164 Supra n. 155.59

Linarelli argues that reasons for such disordered international legal system

is the lack of constitutional order – in domestic constitutional system,

human rights prevail or override market liberalization (at least on paper, i.e.

in theory).165 But in the world trade system, human rights concerns do not

have such strong position and can be simply swept aside.166

Another important aspect of Art. VIII is its potential inconsistency with the

provisions of the new EU Directive, which is of a great significance in cases

when both documents apply. The number of differences between the new

EU Directive and the GPA (focusing on social ones) are too extensive to be

analyzed in this thesis, but for the sake of demonstrating the potential

difficulties, we can have a look at Art. 57 of the new Directive and Art VIII

of the GPA. Art. 57 of the new Directive lists exclusion grounds which are

wider (and more detailed) than the conditions of participation laid out in

Art. VIII of the GPA. Amongst others, Art. 57 4(a) authorizes contracting

authorities to exclude an economic operator who violated obligations

referred to in Art 18(2). In practice, this means that contracting authorities

of an EU Member State could exclude an economic operator from the US

from participating in a procurement procedure, whose value is above the

threshold needed for application of the GPA (meaning that both documents

apply), if the authorities can demonstrate by any appropriate means that the

economic operator has violated, for example, freedom of association (a core

labour right). Whether this exclusion ground is compatible with the GPA

depends solely on how wide its interpretation is.

All in all, GPA is primarily and mostly concerned with securing the

transparency and openness of the procurement market. Consequently, and as

demonstrated above, it could be difficult to apply it simultaneously with the 165 Linarelli, J., How Trade Law Changed: Why It Should Change Again, Mercer Law Review, Vol. 65, Issue 3, 2014, pp. 621-668.166 Linarelli further suggests that moving regulation of PP from the level of domestic regulation, where human rights are or should be of primary consideration, to the level of international (trade) legislation, in which human rights are “often seen as illicit or inappropriate”, opens up a playing ground. Such playing ground is limited only by the fact that nothing within it can limit the free trade. Such system is indeed problematic, as it is clearly taken outside other international system or group of national systems and placed beyond it, namely beyond human rights. One might think that placing it out and above national systems is done precisely for the reason to avoid restraints of justice and human rights. See more in: Linarelli, How Trade Law Changed: Why It Should Change Again, 2014.

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documents that are trying to secure (socially) sustainable PP. However,

there is a glimpse of hope for the GPA if we consider the WTO’s preambles

and different policy statements, which are much more supportive of wider

societal goals of sustainable development than the actual legal texts. The

interpretation of the GPA is therefore determinative for whether this

document will have a limiting effect on the usage of social clauses in PP or

whether it will (silently) allow social clauses in PP.

3.3 ILO Convention concerning Labour Clauses in Public Contracts

Labour Clauses in the Public Contracts Convention, 1949 (No. 94)167 and

Recommendation (No. 84) are the oldest international documents related to

socially sustainable PP. In fact, Convention No. 94 is still the only

international binding treaty concerning labour rights in regard to PP. Since it

only applies to the services168 and not to the goods of standard production,169

it is not directly applicable to the matter of this thesis, but can, anyway,

contribute to the cause and could offer lessons for future developments.

Lack of applicability can be understood by considering the fact that in 1949,

when the convention was adopted, the world economy (of goods

manufacturing) did not function through global supply chains, and was

therefore not putting pressure on labour standards in the ways we know it

today.

Convention No. 94 is currently ratified by 93 countries,170 but only a quarter

of those is substantially implementing it (and not just depending on national

labour legislation to be sufficient).171

167 ILO Convention no. 94 on Labour Clauses in the Public Contracts, 1949. Text of the convention available at: http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_INSTRUMENT_ID:312239, (10.5.2015).168 Arrowsmith, S., Linarelli, J. and Wallace, D.: Regulating Public Procurement: National and International Perspectives, 1st edition, Kluwer Law International, 2000. Page 281.169 However, it does apply to the cases, where production is undertaken exclusively for a public buyer, usually for large quantities.170 The complete list of ratifying states is available at: http://www.ilo.org/dyn/normlex/en/f?p=1000:11300:0::NO:11300:P11300_INSTRUMENT_ID:312239, (7.5.2015).171 ILO, Labour Clauses in Public Contracts, International Labour Conference 97th Session, 2008. Page xiii.

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The ILO Committee of Experts claims that Convention No. 94 has been

misunderstood since its beginning and it is still not gaining the attention it

should have. The twofold objectives of the Convention are, first, to prevent

labour costs being used as an element of the competition among bidders (by

demanding that they all respect locally established minimal standards), and

secondly, to ensure that public contracts do not create a downward pressure

on wages and working conditions (by placing a standard clause in a public

contract regarding wages and working conditions).172

Interestingly, the ILO Committee of Experts observed that not just that the

Convention is not as widely received as it should be, but that even its

message has been more and more underpinned in the last years by what is

seems to be the primary objectives of the PP policy – the unrestricted

competition and “value for money.”173 Such direction has been,

nevertheless, seen through judgements of the ECJ174 that we addressed in the

EU chapter, in which the ECJ had to balance between economic freedoms

and social rights and mainly protected the former on the account of the

latter. Bruun et al. argued that the contested law of the German federal state

of Lower-Saxony in the Rüffert case was precisely complying with the

obligation from ILO C94 (to oblige companies under public contract to pay

their workers at least the rates set by collective agreements). However, the

ECJ found it being in violation with freedom to provide services (TFEU).175

The EU rules and the Convention are not in direct conflict, but this

judgement did put them in opposing ends.176 The Court’s decision is

furthermore problematic if we take into consideration its decision in the

Levy case and link it to other EU Member States that did ratify C94. In the

Levy case, the Court established that Member State can refrain from

172 Ibid. For examples of such laws see section 2.3.173 Ibid.174 Cases like Laval, Viking, Ruffert. See above in the EU section.175 Bruun, N., Jacobs, A. and Schmidt, M.: ILO Convention No. 94 in the aftermath of the Ruffert case, European Review of Labour & Research, Vol. 16 Issue 4, p473-488, 2010.It is important to stress that Germany has not ratified ILO C94, but a significant number of other EU Member States have.176 Vinterskoug, J., The Scope of Labour Law Requirements in Public Procurement - at the ILO, EU and Swedish Level. Master Thesis, Lund University, 2011.However, it is important to stress again that ECJ’s decision would likely be different in such case under the new set of PP Directives and Transposition Directive for posted workers. See EU chapter for more details.

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applying certain EU provision if it is conflicting with the obligation deriving

from a treaty that has been ratified with a non-member state prior to

ratifying TFEU.177 Despite the unfortunate Rüffert178 decision that widely

opened the floor for social dumping within EU,179 Schulten argues that pay

clauses in PP are experiencing renaissance within Germany and Europe.180

Similarly, despite the downturns of the recent decades that were noted by

the Committee in 2008, it could also not overlook that this topic received

major attention during the last years. Nevertheless, the new EU Directive

reflects increasing influence of social aspect of PP.181 Interagency

Roundtable on CSR,182 which is a joint initiative co-organized by the United

Nations Conference on Trade and Development, the Organization for

Economic Co-operation and Development and the ILO, started the report of

its 2014 meeting by recognizing that landscape in sustainable PP is

changing and that the last decade has brought remarkable transformation of

views regarding sustainable PP, especially its social aspect.183 Some

speakers even argued that we have now reached “near universal consensus

that SPP is fully compatible with free trade and an important part of public

policy.”184 We can certainly not argue that the awareness has spread, but a

lot more will be needed for practical implementation of these principles and

ideas, since practical execution of PP and politics of e.g. ECJ have been far

from fully recognizing and embracing it.

177 ECJ, Case C-158/91 Ministère public et Direction du travail et de l’emploi v. Jean-Claude Levy. Para. 22.178 See supra n. 112.179 European Commission reacted to this by Transposition Directive, which should prevent the faults of social dumping that were created by the Posted Workers Directive and ECJ’s narrow interpretation of its provisions. See infra n. 179 and supra n. 78.180 Schulten, T., Renaissance of Pay Clauses in German Public Procurement and the Future of the ILO Convention 94 in Europe. Global Labour Column, Number 91, 2012. Available at: http://column.global-labour-university.org/2012/01/renaissance-of-pay-clauses-in-german.html, (18.5.2015).181 Directive 2014/67/EU of the European Parliament and of the Council of 15 May 2014 on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System.182 More at: http://www.csrroundtable.org/, (7.5.2015).183 ILO, Summary Report, 2014 Interagency Roundtable on CSR, Sustainable public procurement as a tool for promoting responsible business, 19 November 2014, Geneva.184 Ibid.

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And Convention No. 94 could certainly be a significant factor in this

pursuit. By more rigorous promotion and enforcement, the social aspect

could get a stronger voice in PP and would represent a balancing tool

opposed to economic/trade oriented EU and WTO documents, especially

since Convention No. 94 is the only binding, universal and systematically

supervised document.

However, for the purpose of this thesis, inclusion of standardly produced

goods should be added to the scope of the convention. The Commission

itself noted that it is perhaps necessary for Convention No. 94 and

Recommendation No. 84 to be reconsidered, in order to support pursuit for

socially sustainable PP.185

185 ILO, Labour Clauses in Public Contracts, 2008. Page xiv.64

4. Recent developments in public procurement of the US

It is far beyond the scope of this thesis to give a comprehensive presentation

of the US PP system, especially since it is considered to be nothing less than

a regulatory labyrinth.186 Anyhow, the combined US public purchases are

worth between 350 and 500 billion USD, which makes US the single largest

purchaser in the world187 and, for the reasons of leverage presented in the

first chapter, worth looking into. We will portray a very general overview of

the PP system and outline several selected points that will offer some idea of

how socially sustainable PP of the US is, and offer some general grounds

for comparison to the EU system.188

Firstly, short introduction of the US PP system is necessary. Reference to

legal labyrinth are partly made due to decentralized model of PP – federal,

state and local governments each have their own legislation and procedure

regarding PP. In this sense, the US procurement is fundamentally different

to the EU one, which is harmonized with the set of directives.189 We will

mostly focus on the Executive branch on the federal level, which entails

three main legal instruments: the Armed Services Procurement Act, the

Federal Property and Administrative Services Act, and the Federal

Acquisitions Regulation (hereinafter: FAR)190 which regulates PP of

different executive agencies. The FAR consolidates public laws adopted by

the Congress, the executive orders by the President and the treaties that are 186 Alvarez-Fernandez, A. and Brandstrup, P., The access of third countries to the European Union’s public procurement market, student working paper, Maastricht University, Maastricht Centre for European Law, 2013, (hereinafter “Alvarez-Fernandez, The access of third countries, 2013”).187 Stumberg, R., Ramasastry, A. and Riggensack, M., Turning a Blind Eye? Respecting Human Rights in Government Purchasing, International Corporate Accountability Roundtable, September 2014, (hereinafter “Stumberg, Turning a Blind Eye, 2014”).US federal government itself is the world's single largest consumer. Additionally, US state and local governments purchase twice as much as the federal government.188 Social sustainability aspects of the US federal procurement regulation cannot be analysed in the same way as the EU directive was (each stage of the procurement process separately). For this reason, the two cannot be directly compared.189 The legislative measures during last years actually demonstrate tendency towards harmonization. It is also not impossible that federal Congress would in the future pass a harmonizing comprehensive legislation. Alvarez-Fernandez, The access of third countries, 2013.190 Federal Acquisition Regulation, 48 C.F.R.

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directly enforceable in the US. Yet the federal agencies have the authority to

create their own rules as supplement to the FAR, as long as those rules do

not contradict the FAR.191 The FAR’s length (over 2000 pages) and

complexity (over 50 parts) make it extremely hard to amend generally, as it

applies to a great variety of agencies. However, there are some examples in

the form of executive orders and we will mainly focus on two that are

relevant to this thesis.192

Apart from the length and the complexity of the legislation, the process of

PP in the US is furthermore complicated and fragmented due to roles of

different actors involved in a particular matter. When, for instance, an

interstate highway is to be build, several regulatory and non-regulatory

executive agencies, alongside with state and local authorities, are involved

in such project. This also severely hinders the objective of this thesis as it is

unlikely that all involved actors would have unified social objectives.193

Situation regarding relevant provisions that would ensure social

considerations within the PP process on the federal level is similar. There is

no comprehensive regulation or at least reference to the respect for labour

rights (or other human rights). During the last years, several scattered

documents regulating specific violations of fundamental labour rights were

issued, but there is no reference to respect for internationally recognized set

of human rights194 or at least to core labour rights.

The International Labor Rights Forum pointed out in its recommendations

for the new US National Action Plan on Business and Human Rights that

such incomplete regulation creates large inconsistencies already within the

US international policy as the US trade policy (international agreements,

unilateral import prohibitions and international development programs) aims

to secure workers a broader set of rights.195 This situation is quite interesting

191 Stumberg, Turning a Blind Eye, 2014. Page 18.192 Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, Executive Order 13126, and Strengthening Protections Against Trafficking in Persons in Federal Contracts, Executive Order 13627.193 Alvarez-Fernandez, The access of third countries, 2013.194 Such as it recognized in the Principle n.12 of the UN Guiding Principles on Business and Human Rights.195 Generalized System of Preferences (Trade Act, 1974) requires beneficiaries to respect internationally recognized workers’ rights – apart from four fundamental rights also

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and perhaps surprising since in previous chapters trade law and other market

related regulation were more or less an impediment to labour clauses in PP,

but in this case, trade law covers a wider set of rights than the PP system is

able to secure.196

Prior to the upcoming National Action Plan, the US Government Approach

on Business and Human Rights was published in 2013. It entails a short

paragraph on PP, which is interestingly placed among “New and Emerging

Tools” section. The paragraph acknowledges the significance of the size of

the US procurement on a global market and as such, the authorities should

be aware of the human rights impacts of its purchasing decisions.197 One

cannot help but feel surprised and perhaps perplexed by the fact that the US

government comprehends the fact of being the largest purchaser in the

world and yet PP does not have a clear social policy or at least a

commitment to such development. Instead, all the attention in the Approach

is given to companies, advising them on what to do to manage their supply

chains in responsible way. Perhaps the US National Action Plan on

Responsible Business Conduct, which is currently being drafted, is an

opportunity to set the future PP policy into more socially sustainable way, at

least on a federal level.198

We will briefly analyse FAR from a labour rights perspective (namely two

relevant executive orders (EOs)) in order to obtain some insight into the

extent to which labour rights are and can be promoted and advanced within

the current legislative framework on the federal level.

acceptable conditions of work regarding wages, hours of work and occupational health and safety. From: The International Labor Rights Forum, Protecting Human Rights through Government Procurement, Recommendations for Responsible Supply Chain Management, Corporate Accountability, and Worker Access to Remedy in US Government Procurement, May 2015. See also: Stumberg, Turning a Blind Eye, 2014.See more also in Simpson, F., Labour Rights Protections within International Trade: A study of Free Trade Agreements and Generalised Systems of Preferences, Master Thesis, Lund University, 2015. Section 3.3.196 Stumberg, Turning a Blind Eye, 2014. Page 25.197 United States Department of State, Bureau of Democracy, Human Rights, and Labor, U.S. Government Approach on Business and Human Rights, 2013.198 Supra n. 195.

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4.1 4.1 FAR and labour rights in generalBefore moving to labour related topics in the FAR it seems logical to

quickly overview principles that guide PP on the federal level. Section 1.102

lays down the principles that guide US federal procurement:

Delivering the best quality products or services on a timely basis

while maintaining the public trust and fulfilling policy objectives.

Maximising the use of commercial products and services.

Using contractors who have a demonstrated record of superior past

performance.

Promoting competition.

Conducting procurement with business integrity, fairness, and

openness.

Fulfilling public policy objectives (such as promoting small business

and maximising use of products from the US and from qualifying

countries with which the US has open trade agreements).

Exercising sound business judgement.199

These principles cover typical components of the economic efficiency

oriented PP. Sustainable or socially responsible PP is not mentioned (likely

due to complicated and lengthy amending process of the FAR), however, it

could be included under fulfilling public policy objective. In contrary to

Art. 18(2) of the new Directive, FAR does not specifically emphasize or

demand respect for human or labour rights by the contractors, as it assumes

that other relevant legislation and authorities, such as courts, inspection and

tax services, will take care of this.200 Since numerous companies that have

been breaking labour law even within the US keep receiving public

contracts and this discussion has been alive for decades, it does not seem

that this system is successful.201 Such stand in general is in deep

199 Duvall, R., Elling, T. and Taylor, T., Public procurement in the United States: overview, Holland & Knight LLP, 2013. Available at: http://us.practicallaw.com/3-521-7446?q=&qp=&qo=&qe, (19.8.2015).200 Stumberg, Turning a Blind Eye, 2014. Page 24.201 Already in 2000, after heavy criticism that federal contractors are amongst the largest law-breakers, FAR Council authorized, though not require, contract officers to find out whether potential contractor complies with applicable legislation. This decision was under heavy criticism by business groups and was removed under President Bush. More at: Borenstein, S., Congress Debates Whether Lawbreakers Should Receive Contracts Many

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contradiction to the developments in the international arena. The very

reason for the start of a debate on business and human rights and its intense

development lies in a recognition of a fact that national systems of

protection of human rights are simply not sufficient anymore (if they ever

were), especially since business operations delivering goods and services

have spread globally through complex and far reaching value chains.

Following this, we need to find new ways and mechanisms to achieve

companies’ respect for human rights apart from just relying on national

authorities to do their job properly. In this aspect, the US regulation of PP

can be designated as regressive and clearly unable to secure socially

sustainable PP. This is even more valid in the terms of this thesis that strives

to ensure transnational respect for labour rights in PP. If the US federal

authorities are not able to avoid contracting with, or exercise leverage over,

labour-law breaking companies within its jurisdiction,202 how can we even

expect them to do better with companies that violate labour law abroad?

President Obama did issue an EO in July 2014,203 authorizing agencies to

exclude contractors that violate thirteen US domestic laws that the EO lists.

In the context of this thesis, this would effectively mean that there is no

restrictions for contractors that violate core labour rights abroad or have

such violations occurring in their supply chain.204

Still Get Government Money Despite Guilty Pleas Or Settlements. Strict Interpretation Of The Rules Could Disqualify 23 Of The Top 25. Article, Inquirer Washington Bureau, 22.7.2000. Available at: http://articles.philly.com/2000-07-22/business/25610736_1_contractors-joshua-gotbaum-violations-of-federal-tax, (23.6.2015). Also: Nakashima, E., Clinton Contractor Rule Is Suspended, article, The Washington Post, 31.3.2001. Available at: http://www.washingtonpost.com/archive/politics/2001/03/31/clinton-contractor-rule-is-suspended/98aeef4a-99d8-4d3b-901a-c1665db6585c/, (23.6.2015).202 The investigation by the Health, Education, Labor, and Pensions Senate Committee found that almost 30 percent of the top violators of federal wage and safety laws were also current federal contractors. United States Health, Education, Labor, and Pensions Senate Committee: Acting Responsibly? Federal Contractors Frequently Put Workers’ Lives and Livelihoods at Risk, Majority Committee Staff Report, 11.12.2013. Full report is available at: http://www.help.senate.gov/imo/media/doc/Labor%20Law%20Violations%20by%20Contractors%20Report.pdf, (23.6.2015).203 Prohibiting Discrimination Based on Sexual Orientation and Gender Identity, Executive Order 11246.204 With the exception of the two EOs that we will analyse later in this chapter.

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4.2 Amending FAR and Executive OrdersBefore moving to the analysis of the two EOs, a short explanation of a legal

situation around creating the EOs in PP is necessary. As we mentioned, the

EOs are one out of three sources of rules in the FAR (the other two being

laws adopted by the Congress and directly applicable international treaties),

and are issued by the President, who is the head of the Executive branch.

This makes an EO the least complicated way to amend the FAR (in relation

to congressional laws and ratified treaties) and the federal procurement

policy.205 However, the EOs can also be seen as the weakest source of law as

they can be re-sended or changed by any new President.206

In any case, the President cannot just arbitrarily determine the content of an

EO, especially if such order would pursue deeper socio-economic goals, as

this would constitute an infringement of the Congress’ authority.207

Presidential authority to issue EOs has to come from an act of the Congress

or from the Constitution.208 The foundation in the Constitution derives from

Article II, meaning that it contains military related issues and topics related

to foreign policy, which entails the authority to negotiate treaties.209 The

congressional authorization derives from the Federal Property and

Administrative Services Act of 1949, which gives the authority to the

President to establish policies or directives necessary to advance “economy”

or “efficiency” in federal procurement.210 However, the scope of EOs based

on the Federal Property and Administrative Services Act of 1949 that are

trying to set human rights standards in PP is limited to international human

205 Stumberg, Turning a Blind Eye, 2014. Page 18.206 Nancy Gillis, Guidelines on Sustainable Public Procurement by U.S. Government, speech from 26.4.2012, Youtube. Available at: https://www.youtube.com/watch?v=zMCvWUYoDJQ, (12.6.2015).207 Stumberg, Turning a Blind Eye, 2014. Page 18.208 Ibid.209 Article II, US Constitution. Available at: https://www.law.cornell.edu/constitution/articleii, (20.6.2015).210 Federal Property and Administrative Services Act, 40 U.S.C. §§ 101. See also: Burrows, V. and Manuel, K., Presidential Authority to Impose Requirements on Federal Contractors, Congressional Research Service Report for Congress, 14.6.2011.The example is the Fair Pay and Safe Workplaces, Executive Order 13673, which specifically referred to FPASA as a source of President Obama’s authority. However, this EO is explicitly applicable only to the US territory, so it cannot be used for transnational promotion and advancement of labour rights that this thesis is arguing for. Stumberg, Turning a Blind Eye, 2014. Page 19.

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rights, to which the US are bound by ratified treaties, or to the rights that

derive from domestic legislation.211 The facts that the US have ratified only

a small number of treaties and that they are especially weak in regard to

social and economic rights212 leave a very limited space for potential

introduction of social clauses in PP on the federal level.213 This is even more

significant in the light of this thesis, which discusses extraterritorial respect

for labour laws down the supply chain if we consider the strong

presumption against the extraterritorial application of the US statues.214

Yet couple of EOs protecting some core labour rights have been issued and

we will now take a look at them.

4.2.1 Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, Executive Order 13126

Child labour is perhaps the topic with the longest history of transnational

action on social issues through PP in the US. In 1999, President Clinton

issued EO 13126 (Subpart 22.15 of the FAR),215 which requires the US

Department of Labor to maintain a list of products and their countries of

origin that are likely to be produced by forced or indentured child labour.216

Federal contractors that supply products from the list have to certify that

they made an effort in good faith to determine that forced or indentured

child labour was not used for production of items supplied and that they are

unaware of any such use of child labour.217 Such demand on contractors is

certainly better than none, however, it does not create any strong obligation

to prevent the occurrence of forced and indentured child labour in one’s 211 Stumberg, Turning a Blind Eye, 2014. Page 19.212 First big impediment is non-ratification of ICESC. Furthermore, US has ratified only two out of eight core ILO conventions (C105 on forced labour and C182 on the worst forms of child labor).213 For the chronological list of all executive orders that used PP to address human rights issues look: Supra. Stumberg, Turning a Blind Eye, 2014. Page 20.214 US laws apply abroad only if they explicitly state so, e.g. in U.S. Foreign Corrupt Practices Act, 15 U.S.C. § 78dd(1)-(3), 1998. From: Stumberg, Turning a Blind Eye, 2014. Page 20.215 Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, Executive Order 13126.216List of Products Produced by Forced or Indentured Child Labor, Bureau of International Labour Affairs, 1.12.2014. Available at: http://www.dol.gov/ilab/reports/child-labor/list-of-products/index-country.htm, (25.5.2015).217 Ibid.

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supply chain. Certifying in good faith is the weakest form of due diligence

and together with the lack of government’s oversight of supply chains only

little effect can be expected of such forceless demands.218 According to the

text of the EO, the contractor has to provide “reasonable access to the

contractor’s records, documents, persons, or premises, if reasonably

requested by authorized officials of the contracting agency.”219 And

responding to that, if the contracting agency has a reason to believe that

forced or indentured child labour was used and that the contractor did not

make good faith effort to determine whether the prohibited products were

used, “the head of the executive agency shall refer the matter for

investigation to the Inspector General of the executive agency […].”220 The

head of the executive agency can terminate a contract, debar or suspend a

contractor from eligibility for Federal contracts, and include the name on the

List of Parties Excluded from Federal Procurement and Nonprocurement

Programs.221 Such provisions leave a lot of operational freedom, as a

contracting officer has to have a reason to believe that forced or indentured

child labour has been used. Online research and the reports of the United

States Department of Labor on this topic do not give any account on the

usage of this procedure in practice, so it is hard to assess the effectiveness of

this EO in day-to-day procurement activities. The text itself certainly gives

some possibilities to prevent some forms of child labour in certain

industries/sectors, though its actual application in practice could not be

confirmed at this point.

An important theoretical aspect to this EO, which we are able to comment

on, is the term forced or indentured child labour. Section 6(c) of EO 13126

(22.1501 FAR) defines it as all work that is:

218 International Labor Rights Forum, Dignity and Justice for Workers Worldwide, PowerPoint presentation, 2015. Available at: http://www.laborrights.org/publications/government-procurement-and-rights-workers-contractors%E2%80%99-supply-chains, (26.6.2015).219 EO 13126, Sec. 3(a)(2); from Van Daele, A., International Labour Rights and the Social Clause: Friends Or Foes, 1st edition, Cameron May, 2005. Page 521.220 EO 13126, Sec. 3(b).221 EO 13126, Sec. 3(a)(2); from Van Daele, International Labour Rights and the Social Clause: Friends Or Foes, 2005. Page 521.

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“… (1) exacted from any person under the age of 18 under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily; or

(2) performed by any person under the age of 18 pursuant to a contract the enforcement of which can be accomplished by process or penalties.”

Such definition is problematic due to the scope of the definition. Child

labour has been one of the major international topics for decades and the

ILO’s definition of child labour is more or less universally accepted.222 It

would not be so problematic if only linguistically different definition was

adopted, which would still cover the same cases of child labour. But

changing the definition so drastically that many cases fall out of its scope, is

indeed a cause of concern. The definition of the EO basically covers only

cases where children are forced or deceived into work. To portray an absurd

example: by reading solely the text of definition, minerals that would be

extracted by 11 year-olds in Bolivia, who do mining since this is their only

way to earn money in order to survive, is not eligible to be placed on a list,

since there is a factor of force or deceit missing. Such definition by far does

not cover all forms of child labour as defined by the ILO and not even all

types of the worst forms of child labour.223

There are certainly many positive aspects to such regulation, especially

since it is being the first of the kind to address violations of labour rights

outside the US territory (down the supply chain) through PP in the US. The

list of products has been growing throughout the years and currently entails

54 products.224 Further positive fact is that the EO does not make any

distinction based on legal situation of the supply chain: “It is important to

clarify that the EO List does not […] distinguish between products produced

in a main/final establishment versus products produced by suppliers and

contractors further down the supply chain.”225 It also has the same effect no

222 UNICEF did form a slightly different definition, but both definitions more or less cover the same type of work. For details see e.g.: http://www.un.org/en/globalissues/briefingpapers/childlabour/intlconvs.shtml, (25.6.2015).223 World Vision, Creating Markets for Child-Friendly Growth, Addressing child labour through G20 public procurement, Policy report, April 2014. Page 31.224 Supra n. 216.225 United States Department of Labor, Office of the Secretary of Labor, Notice of Final Determination Updating the List of Products Requiring Federal Contractor Certification as to Forced or Indentured Child Labor Pursuant to Executive Order 13126, 75 FR 42164. Available at: http://www.humanrights.gov/notice-of-final-determination-updating-the-list-of-products-requiring-federal-contractor-certification-as-to-forced-or-indentured-child-

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matter at what stage or in what quantity the products from the list have been

in part or wholly included in the supply chain.

If we draw a general line under this EO, it could be marked as a good first

step towards socially responsible PP. It is the first in the US to take into

consideration labour rights outside of the US in relation to PP. And it is not

surprising that the first document relates to child labour, as its prohibition is

one of the most universally accepted ideas of human rights.226

However, the usability of this EO for achieving socially sustainable PP

according to today’s standards is questionable. After the UN Guiding

Principles on Business and Human Rights we talk about holistic approach –

all companies, all human rights, on all levels. We could understand this list

of products as emphasizing the most egregious and widespread violations

(as Principle 24 is instructing), but this is certainly not sufficient, since there

is a general rule (a prohibition to use child labour for all contractors and

subcontractors) missing. According to the legislation as it is, PP regulation

on a federal level implies that the authorities are only concerned about

forced or indentured child labour of certain products (and trafficking, which

we will analyze below). And even if we focus only on forced and indentured

child labour it is questionable whether such list approach really prevents it.

It surely establishes some additional requirements of care for products with

the highest risk of child labour occurrence, but such regulation offers no

guarantee for its actual elimination. On the other hand, we cannot ignore the

political and economic pressure that such “black list” can create, and certain

countries that want to represent themselves as human rights respecting

countries might take additional measures to eliminate child labour in order

to satisfy foreign buyers and investors.

At this point, we will not mull over the reasoning behind this legislation,

because reason being whatever it is, it should lead to the same goal.

Considering that it was adopted in 1999, when the idea of socially

responsible PP was at its earliest stages, makes this piece of legislation quite

labor-pursuant-to-executive-order-13126.html, (15.7.2015).226 Child labour is prohibited all around the world and Convention on the Rights of the Child is the most widely ratified human rights convention.

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unique and groundbreaking. On the other hand, we cannot claim so much

for its aftermath. One might expect the emergence of new documents

tackling other labour violations and preventing taxpayers’ money supporting

them, but, apart from EO 13627,227 none came. This document was a

promising start to socially responsible PP, in which the US could be a front-

runner, but it turned out to be an isolated attempt. Other countries (e.g. some

EU Member States) have in this time developed far more complex and

wholesome mechanisms to deal with labour rights in PP, while the US

stayed behind for over a decade with this single EO. Even the progress that

was achieved in human rights and business with the UN Guiding Principles

on Business and Human Rights has not brought any changes so far. In the

terms of the Principles, the US are taking a piecemeal approach, embarking

upon only selected labour issues instead of demanding respect for all

(applicable) labour rights.228 And for this, we cannot name this EO anything

more than a good first step. Such it is, but the international development in

this area has been so intense that sticking with the same initial step for over

15 years is simply insufficient.

To look at it from the US perspective, the picture could be quite different.

Some might argue that just keeping this piece of legislation is a success,

given the fact that any legislative attempt that lays out certain (human rights

related) obligations and limitations on business finds itself under the most

severe attacks by the representatives of business and (usually) conservative

politicians, which have a historically strong tendency to protect business

from state restrictions and interference.229 In a political climate where liberal

market is at a core of society’s values any pursuit for strong labour rights is

likely to be attacked as a limitation to the market and entrepreneurs.

227 See the next section.228 The further aspect that we did not go into is the extent of the actual enforcement of the laws.229 We mentioned an applicable example above – Bush administration removed heavily criticized Clinton's rule that prevented businesses, which violate applicable labour legislation, from obtaining federal contracts. The rule was again reinforced under President Obama, which demonstrates how heavily dependent on current political situation any such legislation is.

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4.2.2 Strengthening Protections Against Trafficking in Persons in Federal Contracts, Executive Order 13627

Executive order on strengthening protection against trafficking in persons in

federal contracts was issued by President Obama in 2012 and can, as

opposed to the EO on prohibition of acquisition of products produced by

forced or indentured child labour, serve us as an example of a much more

elaborate piece of legislation that demands concrete steps on preventing

trafficking and forced labour by federal contractors or subcontractors.

This EO can also be seen as one of the stepping stones towards ‘zero

tolerance approach/policy’ on human trafficking and forced labour as the

US federal government is promoting it.230 This legislation complements and

strengthens already existing Trafficking Victims Protection Act of 2000231,

which prohibits Government employees and contractors from engaging in

trafficking in persons. FAR Council has implemented this EO and the

Ending Trafficking in Government Contracting of the National Defense

Authorization Act for Fiscal Year 2013 in the FAR (under subpart 22.17)

after public consultation in 2013.232

FAR 22.17 imposes a variety of prohibitions on contractors and

subcontractors, which usually constitute or may lead to some form of

trafficking (commercial sex, forced labour, fraud, worst forms of child

labour).233 Such prohibited activities are: charging recruitment fees to

employees; using misleading or fraudulent recruitment practices; providing

housing that fails to meet the host country and safety standards; failing to

provide a written contract in the employee’s native language; destroying,

concealing, confiscating, or otherwise denying an employee an access to

230 See more at: https://www.whitehouse.gov/the-press-office/2012/09/25/fact-sheet-executive-order-strengthening-protections-against-trafficking, (29.7.2015).231 22 U.S.C. 7102.232 Farhat, V., Shepherd, W. and Canale, J., United States: Proposed Anti-Human Trafficking Rule Could Significantly Affect Contractor Compliance Programs, newsletter, January 8, 2014, Holland & Knight LLP. Available at: http://www.hklaw.com/publications/proposed-anti-human-trafficking-rule-could-significantly-affect-contractor-compliance-programs-01-08-2014/, (1.8.2015).233 FAR 22.1702.

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his/her identity documents; etc.234 There are also subsequent requirements,

such as: contractor has to protect and interview all employees suspected of

being victims or have witnessed prohibited activities requirements, or that a

contractor has to self-report to the Inspector General of the pertinent agency,

and law enforcement, if applicable, if a contractor finds out or is aware of

any violations.235

Very relevant for this thesis is also a special requirement for large overseas

contractors and subcontractors – i.e. combined contracts or subcontracts

abroad exceeding 500,000 USD. They have to maintain an appropriate

compliance program, which has to include activities taken to prevent human

trafficking. Such compliance plan has to be published on company’s

website. If they do not have a website, it has to be sent to anyone that

requests it. However, we encounter the same limitation as we encountered

with the ILO convention – this requirement does not apply to contracts and

subcontracts for solely commercially available of-the-shelf items.236

Unfortunately, this means that industries that are highly susceptible to

different forms of human trafficking, e.g. garment factories, electronics

industry or agriculture can be exempt from the compliance plan

requirement. Nevertheless, all other requirements apart from the compliance

plan are still applicable also for such contracts. Department of Justice

subjected false certification in government contracts to liability under the

False Claims Act237 and damages can be substantial.238

234 See FAR subpart 22.17. More in: International Corporate Accountability Roundtable, Executive Order on Trafficking in Persons. Available at: http://hrdd.icar.ngo/content/executive-order-trafficking-persons, (28.7.2015).235 Ittig, K. and Witten, S., Preparing for New Anti-Human Trafficking Rules for Federal Contractors and Subcontractors: What Companies Need to Know about Obligations, Implementation, and Enforcement, PowerPoint presentation, March 12, 2014, Arnold & Porter LLP. Available at: http://www.arnoldporter.com/events.cfm?action=view&id=924, (1.8.2015).236 Commercially available of-the-shelf items are defined in FAR rule 2.101. It is de facto the same rule as we met in the ILO section. It basically means that FAR applies only to (apart from the services, which are by their nature done for a specific purpose) products that are produced specifically for a public contract or are at least modified fort this reason. Therefore products that are sold in substantial quantities in the commercial market fall out of the scope of this legislation.237 31 U.S.C. §§ 3729–3733238 Supra n. 235.

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Apart from the exemption noted above, the rules of the FAR subpart 22.17

affect all government contractors and subcontractors, regardless of the size

of contract or subcontract. This is a huge step forward, if compared to the

EO on child labour. It is also aligned with the UN Guiding Principles, which

places the obligation to respect human rights on every company, regardless

of its size, sector, operational context, ownership and structure.239

Potential violations of the requirements in the subpart 22.17 can result in:

requiring the contractor to remove a contractor employee or

employees from the performance of the contract;

requiring the contractor to terminate a subcontract;

suspension of contract payments;

loss of award fee, consistent with the award fee plan, for the

performance period in which the government determined contractor

non-compliance;

termination of the contract for default or cause, in accordance with

the termination clause of this contract;

or suspension or debarment.240

Overall, EO 13627 gives a much more complete regulation of the topic as

the forced or indentured child labour one. This EO builds on and

supplements already existing legislation on prevention of human

trafficking.241 Naturally, there are 13 years between these two acts and the

difference between the depth and nature of the obligations they impose on

239 Principle 14 of the UN Guiding Principles on Business and Human Rights.240 As prescribed in 22.1705(a), see 48 U.S.C. 52.222-50.241 One of the relevant legislation that has not been mentioned so far is the California Transparency in Supply Chains Act, SB 657, but it is a state level legislation, only applicable in California. There is currently a bill in the Congress (The Business Supply Chain Transparency on Trafficking and Slavery Act of 2015) that would secure the same requirements nation-wide, however, it is unclear at this moment whether it has sufficient political support to pass.See: Wheeler, L., House bill would force businesses to detail anti-trafficking efforts, article, 27.7.2015, The Hill. At: http://thehill.com/regulation/249328-house-bill-would-force-businesses-to-report-anti-trafficking-policies, (2.8.2015); and Altschuller, S., H.R. 3226: New Bill Calls for Transparency on Trafficking and Slavery in Corporate Supply Chains, newsletter, 4.8.2015, Foley Hoag LLP. Available at: http://www.csrandthelaw.com/2015/08/04/h-r-3226-new-bill-calls-for-transparency-on-trafficking-and-slavery-in-corporate-supply-chains/, (6.8.2015).

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government contractors demonstrates the progress in the field of public

procurement and human rights.242

Human trafficking could serve as an example for other human rights areas

that could make use of a more systematic legislative approach (and also

being covered by PP). At the same time we need to keep in mind that such

piecemeal approach is not in line with the UN Guiding Principles on

Business and Human Rights. What is missed, hence, is a general rule that

would oblige companies competing for federal contracts to respect human

rights anywhere they operate and to secure the same in their supply chains.

To be clear, this chapter has not presented a systematic analysis of the FAR

as it was done for the new EU Directive.243 As we mentioned at the

beginning of this chapter, the same analysis would not even be possible,

since the EU directive implemented social concerns on almost every level of

PP procedure (see EU chapter), whereas the US approach on a federal level

is, as already stated, piecemeal.244 It deals with specific human rights issue

and is not really part of the PP process in the sense that it would make an

impact on actual outcome of the process.245 The US requirements are more

like necessary prerequisites that need to be in place for every company

wanting to bid for federal contracts. In the EU, social aspects may influence

the outcome of the process – e.g. it can be one of the contract award criteria.

Another difference is that EU system is harmonizing the entire PP within

the Union, whereas FAR only applies to agencies on a federal level.

242 This progress is by far not even close to the progress of environmental aspect in public procurement in US. In this thesis it is not possible to give a comprehensive explanation to why environmental aspects are so much more included into PP than social ones, however some reasons stand out as obvious – climate change is scientifically proven and will significantly impact economies in the future; it is somehow less political than human rights; it affects everyone, which is not so with human rights violations abroad.See more on future environmental plans in US PP at: https://www.whitehouse.gov/the-press-office/2015/03/19/executive-order-planning-federal-sustainability-next-decade, (3.8.2015).243 For more details on FAR and human rights, see the report: Stumberg, Turning a Blind Eye, 2014.244 FAR prohibits forced or indentured child labour (FAR 22.15), several types of human trafficking (FAR 22.17) and discrimination within US territory. We did not analyse the last part since it has no extraterritorial implications.245 E.g. FAR stipulates that commercially available off-the-shelf-products bids can be chosen based upon »only price and the price-related factors included in the invitation.« FAR 14.10 and 14.408-7.

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As we mentioned above, the US public purchasing system relies on relevant

legislation and its execution to secure respect for human rights and for this

reason does not places additional requirements in PP rules. Such stand is

clearly unfit for this day and age when a consensus on international level is

obvious – national institutions and laws are detriment to securing respect for

human rights, but due to weaknesses of national legal frameworks

(especially in developing countries), and/or the pressures to which they are

subjected by international economic interdependencies, market competition

and misconduct by powerful actors, need to be supplemented by including

human rights protection safeguards in new areas, such as new areas of law

(like PP), new actors (e.g. private actors) or across jurisdictional borders.

Human rights cannot be secured solely by national institutions, especially

when private parties can have such a huge influence on everyday aspect of

everyone’s life. The entire international business and human rights debate

started over the realization that traditional governmental tools alone are not

sufficient for securing respect for human rights, but the US PP system is still

stuck in this old paradigm. Changes are happening which is clear with the

EO 13627; however, a more systemic reform is needed instead of adding

individual requirements to certain “hot” topics. Certainly PP is not the only

area that can and needs to evolve in the direction of supporting labour

rights, but it surely has to play its part (together with other protective

channels mentioned above) in a new and more complex legal labour/human

rights architecture.

The EU approach is definitely more appropriate for the purpose of this

thesis – promotion, and also for the advancement of labour rights – as it

contains provisions/tools to satisfy both (to certain extent). Firstly, general

Art. 18(2) covers the compliance part (economic operators need to respect

minimal rights) and secondly, the procedure is designed in a way that can

reward the best practices to certain extent and, therefore, facilitates the

advancement. This second part is not covered in the current US legislation,

which only demands compliance with certain human rights standards for all

competing companies. Without any incentive and stimulus to do better than

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the minimum that is required, it is unlikely that competing companies would

do more.

However, it would be unfair and unsubstantiated to just designate US

legislation as less socially sustainable, considering that we only dealt with

certain pieces of the federal legislation. Not being limited by single market

principles such as equal treatment and non-discrimination like their counter-

parts in the EU, the US state and local governments have been able to apply

various methods and initiatives that promote various social and

environmental objectives.246 One of the most established ones is Sweatfree

Purchasing Consortium which will be explained more in detail in the

following chapter.

246 List some examples. Sweatfree Purchasing Consortium, http://buysweatfree.org/, (12.9.2015); San Francisco Food Policy, Executive Directive No. 09-03; Environmentally Preferrable Purchasing Programme, http://www.epa.gov/greenerproducts/about-environmentally-preferable-purchasing-program, (12.9.2015).

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5. Public procurement in practice – implementation aspects

In the previous chapter and its sections, we made an overview of the

legislative framework in regard to labour rights in PP in the EU, at the ILO

and WTO level, and in the US. Many challenges and obstacles, but also

opportunities for socially sustainable PP in legislation were presented. In

this chapter, we will take a more practical approach and identify some good

practices and examples from both European states and the US.247

Particularly on a local level there have been various initiatives and

approaches that could offer valuable lessons for future legislation and

policies. We will look at the unique approach to socially sustainable PP that

Norwegian authorities have taken; the lessons learned after Swedish NGO

Swedwatch published their report on child labour in the production of

surgical tools that Swedish health authorities are purchasing; and Sweatshop

Purchasing Consortium in the US. From these examples we will try to

excerpt features and characteristics of sustainable procurement practices

such as, specific knowledge of procurement officers, common approach,

cooperation of public purchasers, etc. which could serve as a basis or

otherwise good examples for future legislative solutions.

In the last part we will examine the business case for conducting socially

sustainable PP. This thesis began with the idea of business and human rights

– there is increasing pressure on companies to act socially (and

environmentally) responsible. If companies have found different (more or

less successful) approaches and techniques to do so, should not public

authorities consider the companies’ approaches and apply certain measures?

An example will be given on the case of IKEA, a Swedish furnishing

company which developed specific instruments and procedures to purchase

indirect services and products. Naturally (and logically), there are great

247 “In the EU Member states, local authorities have slightly more legislative space to conduct socially responsible PP in the case of falling under the applicability threshold of the new Directive (depends on a state legislation). In US, local authorities' hands are even freer to regulate PP, as they are not bound by federal legislation.” Jörgen Hettne interview, Institutionen för handelsrätt, Lund University, 11.8.2015, Lund, Sweden.

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differences between public and private purchasing, which we will have to

lay out though at the same time we will find many similarities. Despite the

undeniable fact that private operators are, due to lesser legislative restraints

than public authorities, able to apply methods of procurement that are far

more advanced and fitted to serve the purpose of securing sustainable

supply chain, it should be very useful to explore the ways of private

purchasers as certain methods might come as highly useful for PP.

5.1 Local approaches, initiatives and lessons on socially sustainable public procurement

5.1.1 The Norwegian approachNorway has managed to implement several innovative approaches, tools and

processes that secure socially responsible PP. All this was done with

Norway implementing the EU directives on PP into national legislation.

This serves as a valuable reminder that the PP procedure harmonized by the

EU still leaves a certain level of operative space for public authorities to

secure respect for core labour rights and purchase in a socially responsible

way, if they are willing to do so. We will look into some Norwegian

measures and actions taken which are outlined in the guide Walk the Talk:

Ensuring Socially Responsible Public Procurement.248

The Norwegian Ministry of Equality, Children and Social Inclusion issued

this guide in order to make social responsibility “a natural and integrated

part of public procurement in Norway.”249 The report explicitly refers to the

Principle 6 of the UN Guiding Principles.250

The first distinctive feature is the list of high risk products for which human

rights risk assessment is needed.251 The list includes product categories for

which numbers of human and workers’ rights violations are high and

248 Norwegian Agency for Public Management and eGovernment (Difi), Walk the Talk: Ensuring Socially Responsible Public Procurement, 2014. Available at: http://www.anskaffelser.no/samfunnsansvar/sosialt-ansvar/information-english, (12.8.2015).249 Ibid. Page 2.250 See section 2.1.251 Norwegian Agency for Public Management and eGovernment (Difi), Walk the Talk: Ensuring Socially Responsible Public Procurement, 2014. Page 12.

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systemic.252 The list is also not exhaustive and categories can be removed or

added at any time, based on the current situation. Currently, it includes

coffee, tea and cocoa, construction materials (natural stone and timber), cut

flowers, electronics and information and communication technology,

furniture, stationary items, surgical instruments, textiles, work wear and

footwear industry, toys and sporting goods, and tropical fruit. Each category

includes a description of the most common violations and regions, as well as

the list of certificates and initiatives that deal with the specific category.

This list serves both public authorities and suppliers. The former use it as

information about risks at the planning stage of the procurement process. In

such way, public officers responsible for the particular purchase can

recognize potential risks and adapt the process accordingly. Some of these

risks might already be part of initial discussions with existing and potential

suppliers, or perhaps used for the designing of an award criteria that will

take into consideration the identified risks. The supplier can, on the other

hand, determine in advance which products public authorities will have

additional human/labour rights related standards or demands and they can

then act preemptively. It has to be kept in mind that this is still a soft law

tool and does not create any obligation. However, if public officers are

instructed to include this in every relevant procurement it could be of

similar effect. This demonstrates how important the actual procedure in

reality is. It might be that the legislation allows a consideration of social

factors (amongst others),253 but there might be no one using them. However,

one might wonder where is the limit to such optional consideration of social

aspects in relation to non-arbitrariness and value for tax payers money. An

evaluation of social aspects would have to be highly rigorous, otherwise it

could quickly come to a point where an EU lawyer would claim that the

process has contradicted the principles of transparency and proportionality,

not to even mention the extra costs. This implies that public officers using

voluntary social considerations in PP procedure at risking the process later

on being challenged as, for example, dis-proportionate. So the main

252 Current list is available at: http://www.anskaffelser.no/sosialt-ansvar/information-english/high-risk-products, (12.8.2015).253 E.g. like the new EU directive, in which most of labour/social provisions are of voluntary nature.

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challenge of the usage of (voluntary) social consideration is to bring it to the

level that satisfies other principles of modern procurement. We will not go

into further debate on feasibility of such quest at this point.

The next relevant feature is dialogue with existing and potential suppliers

about human/labour rights at all stages of the PP process.254 Since socially

responsible PP/business is a novelty for many business operators, it is

essential to foster cooperation and information sharing.255 The Guide also

encourages public authorities to include this topic in Prior Information

Notices, through which it is announced to the market that SRPP

requirements will be included in future tenders. In such way future bidders

can take specific measures and adjustments prior to bidding. In addition,

tender conferences, seminars and workshops are excellent ground for

discussing socially responsible PP which in turn could even stimulate

cooperation and joint action amongst business operators.

Another interesting tool that serves as part of a verification process after

choosing a tenderer is the self-assessment questionnaire.256 The self-

assessment tool ensures that the supplier’s supply chain meets the

requirements of the social contract performance clauses.257 Submitting this

questionnaire is actually obligatory and if it is satisfactory no further action

is needed.258 If the results of the questionnaire do not sufficiently satisfy the

required standards, a corrective action plan must be created and a given time

frame within which the supplier has to fulfill the requirements of the

corrective action plan allocated. Such tool is more useful in the case of

continuous supplies (e.g. hospital material or stationery), than in the case of

one-time purchases (one-time service or purchase).

Another specific feature is the possibility of visits of suppliers’ factories,

which serve as on-site inspections.259 Besides self-assessment

254 Norwegian Agency for Public Management and eGovernment (Difi), Walk the Talk: Ensuring Socially Responsible Public Procurement, 2014. Page 13.255 Ibid.256 Self-assessment tool is available at: http://www.anskaffelser.no/samfunnsansvar/sosialt-ansvar/information-english, (12.8.2015).257 Norwegian Agency for Public Management and eGovernment (Difi), Walk the Talk: Ensuring Socially Responsible Public Procurement, 2014. Page 19.258 Ibid.259 Ibid. Page 20.

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questionnaires, on-site visits are an additional tool for verification of social

performance clauses. Visits can be carried out randomly or if deemed

necessary when results from the self-assessment questionnaire are

unsatisfactory.260 Such visit would include all typical activities of a social

audit that many private companies execute (or a third person is hired to

carry it out), i.e. tour of the workplace, interviews with workers and

workers’ representatives, disclosure of wage slips, contracts and working

hours records, etc. On-site inspection is surely one of the strongest tools in

securing socially responsible PP. Firstly, it has a psychological effect on

both public authority/officer and the supplier. The public officer diminishes

willful ignorance that is typical for consumers who are detached from the

reality of how the product is made because of the global market that blurs

the reality of how a product was made.261 It is also reasonable to expect to

certain degree that suppliers that are aware of the possibility of inspection

perform better. On-site inspection might also reveal great differences

amongst suppliers of the same product, situated in the same country. On

paper, these suppliers most likely seem to have similar social standards, but

as Grete Solli, senior adviser on socially responsible procurement explains

in the promotional video, her experiences are different.262 She summons the

example of three Malaysian factories that all supply Norwegian health

institutions with disposable gloves. After conducting on-site visits it turned

out that rights of workers and working conditions in the first factory were

exemplary, satisfying in the second, and below any minimum standard in

the third (confiscation of workers’ documents, extremely low wages, etc.).263

Finding this out has enabled Norwegian authorities to act on these findings,

apply corrective actions, and as a result ensured that the Norwegian citizens’

tax money was not used to finance bad working conditions.

260 Ibid.261 See, for example: Irwin, J., Ethical Consumerism Isn’t Dead, It Just Needs Better Marketing, online article, Harvard Business Review, January 12th, 2015. Available at: https://hbr.org/2015/01/ethical-consumerism-isnt-dead-it-just-needs-better-marketing, (15.8.2015); or Schwartz, D., Consuming Choices: Ethics in a Global Consumer Age, 1st edition, Rowman & Littlefield Publishers, 2010.262 Grete Solli – experiences from socially responsible public procurement, video, January 2015. Video available at: https://vimeo.com/112149202, (15.8.2015).263 Ibid.

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All in all, the tools and actions taken by Norwegian authorities can have a

good impact on a market in general; especially if we consider the fact that

suppliers of public authorities are usually some of the largest players on the

market. However, we should not overlook certain characteristics that make

such conduct by the public actors possible. One condition is certainly

financial resources. Public authorities with funds that can hardly cover

operating their primary function are unlikely to be able to spend resources

on securing respect for rights at work of their suppliers.264

Furthermore, it seems that securing socially responsible PP demands a

centralized system of PP (to certain extent). In certain countries, e.g.

Slovenia, almost every public institution (ministries, schools, hospitals, etc.)

has a delegated officer who is responsible for PP of that particular

institution. In such a set-up, it is highly unlikely that every officer will have

the relevant knowledge and resources to provide the same level of social

responsibility in PP as persons who are employed exactly for this reason in

other countries with centralized systems.

5.1.2 Surgical instruments in Swedish hospitalsThe previous section implied that centralized organization of PP is

preferential for achieving socially responsible PP. However, there is a way

for a decentralized PP system to secure social responsibility and we will

demonstrate it with the example of advancement of PP in Sweden.

In 2007 the Swedish NGO Swedwatch published a report on production of

surgical tools that were being bought by Swedish hospitals through Swedish

importers from Pakistan. Swedwatch discovered that factories (and

workshops providing these factories), which were supplying Swedish

hospitals, produced tools under hazardous working conditions, with wages

below the prescribed minimum, in an anti-union environment and through

264 Howe notes that monitoring and enforcement are necessary for the legitimacy and effectiveness of promoting better labour standards through PP. Further, he adds that these processes should be supplemented and complemented by private monitoring by trade unions, NGOs, ILO, local labour inspection etc.Howe, J., The Regulatory Impact of Using Public Procurement to Promote Better Labour Standards in Corporate Supply Chain; published in Macdonald, K. and Marshall, S. (eds), Fair Trade, Corporate Accountability and Beyond: Experiments in Globalising Justice, 1st edition, Ashgate, 2010.

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the use of child labour.265 Pakistani manufacturers emphasized the issue of

pricing in PP, since bettering working conditions creates costs and

consequently raises the price of the product. This would result in less

chances of remaining competitive because awarding public contracts is

heavily based on price.266 A lot has happened since the report was published

as Swedish county councils, which are responsible for health care in each

region, took several measures in order to improve the situation presented in

the report. The interesting aspect for our purposes is the cooperation that

arose amongst country councils. The National Coordinator of county

councils started the process and in 2010 adopted a joint code of conduct.267

County councils now cooperate much better and are able to secure more

sustainable procurement through for example, introducing social criteria in

public contracts, co-financed audits at the suppliers and results sharing.268

Swedwatch went back to Pakistan in 2014 and discovered that, in factories

(and connected workshops) supplying Swedish buyers child labour was not

present anymore; wages were paid in accordance with the minimum wage;

and that employees were no longer forced to work overtime.269 Working

conditions and safety remained problematic despite certain improvements.270

Some other factories which supply surgical equipment to other buyers at

present in the European market were also visited in the same region and it

was found that child labour was still present in those factories. This clearly

demonstrates that the actions of the Swedish authorities which strengthened

social demands in PP did make a significant difference in factories and

workshops linked to them through the supply chain. However, Swedwatch

still emphasizes that price is still too big of a factor in PP and that the

authorities have to allocate more money into securing sustainable

265 Swedwatch, Vita rockar och vassa saxar. En rapport om landstingens brist på etiska inköp, report n. 16, 2007. The report is available only in Swedish language at: http://www.swedwatch.org/sv/rapporter/daliga-forhallanden-bakom-tillverkning-av-klader-och-kirurgiska-instrument, (22.8.2015).266 Swedwatch, Healthier procurement, Improvements to working conditions for surgical instrument manufacture in Pakistan, report n. 73, 2015. The report available at: http://www.swedwatch.org/en/reports/healthier-procurement, (22.8.2015).267 Ibid.268 Healthier procurement, video, Swedwatch, 2015. Available at: https://vimeo.com/122554492, (22.8.2015).269 Supra n. 266.270 Ibid.

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procurement.271 The issue of pricing is certainly one of the main challenges

for achieving sustainable procurement – as long as public contracts are

awarded predominantly based on price the suppliers will be challenged.

Rigorous enforcement of and control on social criteria set in contract

performance clauses can definitely create a level-playing field among the

suppliers, but the challenge of offering the lowest price still remains. As a

consequence, suppliers might for example exercise pressure further down

the supply chain, which could affect labour standards there.

5.1.3 Sweatfree Purchasing ConsortiumIn the previous chapter we analysed US federal legislation, which is rather

restricted in options for socially responsible PP, but state and local

governments have greater independence in that aspect. This can of course

result in some state and local governments doing a lot to foster socially

sustainable PP, and some doing nothing. One of the most prominent

attempts for socially sustainable PP is the Sweatfree Purchasing Consortium

(hereinafter: the Consortium).272

The Consortium is a membership organisation for public entities in the US

which tries to, “end public purchasing from sweatshops and help its

members make sweatfree purchases more effectively and less expensively

than any single one could accomplish on its own.”273 It functions on the

basis of sharing of supply chain data – member public authorities require

apparel bidders or economic operators to disclose the factories where the

uniforms for public officers (e.g. military, police, etc.) are made and then

they share the information that they receive with the Consortium.274 The

Consortium independently verifies the names and locations of the entities

and adds them to the database which is available to the members of the

Consortium. The contractors are responsible for providing accurate

information to the public authorities or directly to the Consortium.275 Public 271 Ibid.272 Similar initiative in Europe is Electronics Watch, which is a combines efforts of public buyers monitoring and remediating electronics supply chains. See more at: http://electronicswatch.org/en/, (22.8.2015).273 See Sweatfree Purchasing Consortium website: http://buysweatfree.org/about, (21.8.2015).274 International Labour Rights Forum, Dignity and Justice for Workers Worldwide, 2015.275 Ibid.

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authorities therefore have a reliable database that can help them assess their

supply chain situation. The Consortium has a vision and an ultimate goal

that a market of decent working conditions will grow and eventually that

rules of competition will no longer favour businesses engaged with

sweatshop conditions but instead those that provide good value while

respecting rights at work.276

Sweatfree Purchasing Consortium has currently 3 state members (Maine,

New York and Pennsylvania) and 13 cities,277 which is not a great number

given the size of the US. The further downside of this Consortium is

certainly its scope as it only caters to the apparel industry, though there are

other industries with similar working conditions (e.g. electronics,

agriculture, etc.).

However, the idea and movement itself are a positive step, especially taking

into consideration that they are also proposing a Model Sweatfree

Procurement Policy, which would be a recommendation to cities and states

on how to craft procurement legislation in order to secure respect for rights

at work in the apparel industry. This would mean that any other state or city

could implement it. Such cooperation amongst public authorities is also one

of the solutions for decentralized systems to gain expertise and best

practices in sustainable PP at a lesser cost. This is particularly important in

countries like the US that do not place much emphasis on this topic in its

(current) legislation.278

All three subparts with practical examples of attempts for attaining socially

responsible PP offer us some much needed perspective in relation to the

preceding sections of this thesis, which were focused on possibilities and

limitations within the legislation. These examples demonstrate that much

can indeed be done in this area already within the framework of current

276 See: http://buysweatfree.org/about, (21.8.2015).277 See the current list at: http://buysweatfree.org/members, (21.8.2015).278 The International Labor Rights Forum in its recommendation emphasises the interagency collaboration and collaboration with state and local authorities as necessary for maximisation of the effects of socially responsible PP. The International Labor Rights Forum, Protecting Human Rights through Government Procurement, Recommendations for Responsible Supply Chain Management, Corporate Accountability, and Worker Access to Remedy in US Government Procurement, May 2015.

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legislation and the principles and yet in most of the countries, not much or

nothing is being done. Another feature that is common to these three

examples is that attempts to procure responsibly occur in the wealthiest

countries, implying that buying responsibly is expensive, therefore not

economical and in contrary to other principles of PP. This somehow leads us

to an underlying question that has been present throughout this thesis – are

the very foundations of our economic system and liberal market in conflict

with a respect for labour rights?

It seems reasonable to test this idea on a company case. If a company which

operates on purely economic principles (profit making) has a business case

for operating in a socially responsible way, why would public authorities

not do the same?

5.2 Learning from private procurement and responsible supply chain management – the IKEA case279

In times when public procurement legislation is taking baby steps by

including some social considerations in their purchasing, many socially and

environmentally conscious companies have some mechanisms in place for

preventing adverse impacts on the society and environment. We will take

IKEA280 as an example.

IKEA is the world’s largest furniture retailer with operations stretching all

around the world. IKEA does not only sell furniture, appliances and home

accessories, but also designs and produces or purchases them - it owns and

operates 325 stores on all continents except Africa and South America and

directly employs 147,000 people and indirectly, millions more (through

supply chains). It is also one of the few retail companies in the world that

runs its own factories producing certain products from its range.

279 Unless stated otherwise, all information from this section derive from the interview with Henrik Wilson, IMS Sustainability Manager at IKEA Services AB, which was conducted on May 4th 2015 in Helsingborg, Sweden. 280 http://www.ikea.com/, (14.9.2015).

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IKEA has a long standing tradition with working on achieving a more

sustainable life at home, improving energy and resource efficiency and

creating a better life for communities and people.281 One of the corner-stones

of these processes has been IWAY – IKEA’s code of conduct that is applied

to all IKEA’s business partners.282 The IWAY standard lays out

requirements related to working, social, safety and environmental conditions

that must be respected in order to do business with IKEA. It is implemented

and monitored by global and local compliance and monitoring teams, which

include over 80 auditors that are specially trained to continuously check and

advise on IWAY compliance. In the case of non-compliance, various

business consequences are applied.283 Unlike many other companies, IKEA

applies the same standard to every external business partner, no matter at

what stage or for what purpose a business contact is linked to IKEA. This

means that not only the suppliers that produce products that IKEA retails

have to meet the standard requirements, but also everyone else that IKEA is

doing business with in any capacity.284

This leads us to the internal organisation named Indirect Materials and

Services (IMS) which has a similar function in IKEA as PP

officers/departments within public authorities. IMS takes care of

procurement of all services and products that are not being part of IKEA’s

core business – furnishing products. IMS therefore covers all the products

and outsourced services that are not being sold, but are needed for the

functioning of the company (e.g. cleaning services, security services,

281 IKEA, IKEA's Planet & People Positive Sustainability Strategy, 2013. Available at: http://www.ikea.com/ms/en_GB/this-is-ikea/people-and-planet/index.html, (10.8.2015).282 IKEA, IWAY Standard requirement 5.1, 2012. Available at: http://supplierportal.ikea.com/doingbusinesswithIKEA/sustainability/betterlifeforpeopleandcommunities/Documents/Forms/DispForm.aspx?ID=2, (10.8.2015).283 See IWAY standard for details. Business consequences vary depending on severity and repetition of the non-compliance. E.g. second violation of IWAY Must requirements (the most basic social, safety and environmental requirements) in less than 2 years from the first IWAY Must violation results in termination of the contract with IKEA. Other such measure is temporary stop of delivery until the supplier eliminates discovered non-compliances.284 There are some exceptions to this rule: IMS does not impose IWAY standard requirements on global brands that have similar social and environmental standards, because it cannot be expected that global-sized companies would adapt its code of conduct to match demands of a single client. With such companies only frame agreements are signed. Further exceptions from applying IWAY standard requirements are government bodies and financial institutions and banks.

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electronic equipment, buildings, vehicles, equipment in stores like shopping

carts, employees’ uniforms, etc.).

This is the first similarity to public authorities, as those also have their

primary function (e.g. police maintains public safety and respect for laws).

At the same time, public authorities also need indirect services and products

that facilitate their primary function (e.g. policemen need cars, uniforms and

equipment). The difference between IKEA and a public authority is obvious

– IKEA decided that it will adhere to certain social and environmental

standard in its primary role/function and also apply the same standard to its

indirect, secondary business associations. Whereas public authorities have

not; their primary function/product is set and bound by legislation, which

has to enshrine the respect for, protection and fulfillment of human rights.

But secondary activities of public authorities (PP of products and services)

are not bound by the same human rights standards as their primary function.

Depending on applicable PP regulation, it might even be that public

authorities have no human rights requirements on procured goods and

services.

This situation creates a kind of paradox – public authorities, who are an

operative hand of a state, which is primarily responsible for respect for,

protection and fulfillment of human rights, cannot secure the same human

rights standard in its secondary activities as it has to uphold within its

primary function. To draw an extreme case – the police have to for example,

pursue people who employ children as this is against the law, but at the

same time, the police could be buying their uniforms from a supplier who

uses child labour for their production. It might even be that under current

legislation there are some prohibitions against procuring such products, but

if there are no executive and operative options to secure this (due to the

transnational nature of commerce) there is hardly anything that can prevent

the competition for public contract with such products. This implies that

lack of respect for human rights in secondary activities of public authorities

(PP) derives from either lack of legislative authorization to do so, or where

the legislation authorizes it, the lack of effective practical mechanisms to

actually secure that rights have been respected.93

IKEA on the other hand, which as a private company under current

legislation has no obligation with respect to human rights performance of its

suppliers, is striving to uphold the very same human rights standard in its

primary and secondary functions.

This simplified example demonstrates that IMS organization is doing

something that public authorities are relatively restricted in within the scope

of their own activities – demand of every indirect service or product

supplier that it adheres to the same environmental, social and working

standards as IKEA maintains in its primary business.285 Of course, it is

understandable that public authorities cannot run PP processes in the same

way as private procurers (IKEA in this case), given the legislative

restrictions that mainly facilitate principles of fairness, accessibility,

transparency and equal treatment – which private procurers are not bound

by.286 In any case, these principles have to be balanced with other basic

legislation and principles (under which we can count in core labour laws)

and for the sake of legal coherence, PP should still be able to at least secure

that the basic minimum of labour rights are respected by public contractors.

This ambiguity amongst (often) clashing principles certainly exists and will

sooner or later have to be resolved and private procurement could offer up

some ideas.

For better understanding of socially responsible procuring it is worth

looking into how IKEA buys indirect services and products. The elements

of this method could potentially be highly useful for PP.

There are three main principles that guide IKEA’s procurement of indirect

materials and services:

Consolidation of suppliers. This process includes recognizing

strategic suppliers and developing stronger relationship with them.

Lower number of suppliers means less administrative costs, getting a

285 The International Labor Rights Forum, Protecting Human Rights through Government Procurement, Recommendations for Responsible Supply Chain Management, Corporate Accountability, and Worker Access to Remedy in US Government Procurement, May 2015.286 However, practical examples described above demonstrated that public authorities have certain tools or options to check/secure respect for labour rights, but in great majority of (EU) states are not being used – due to lack of knowledge, money, etc.

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better value for products and services, and easier control over the

supply chain.

Standardisation of products and services . Reducing environmental

and social impacts and ensuring quality is less complicated by

offering a selected, streamlined selection of products and services.

Meeting the needs . In order to benefit the most from consolidation

and standardization, the needs of IKEA’s facilities and co-workers

have to be well understood.287

It is evident that these principles are economically efficient while securing

sustainability, which would make them useful for public authorities, and to

certain extent, standardization and compliance already are present in public

purchasing. But consolidation, on the other hand, is actually quite the

contrary to the effect that PP is usually trying to secure – supporting small

and medium sized companies.288

Regarding the purchasing procedure itself, we will not go into the tender

process, because private companies have clearly much more operational

space in this area than public authorities which have to strictly follow the

legislation regarding the publication/announcement of invitation to tender

and submission of bids by economic operators/tenderers in order to satisfy

transparency and equal access for all economic operators. It is sufficient to

mention that IMS uses different ways to discover the situation on a market

and receive the offers.289

The more relevant part for our purpose is the decision making by IKEA.

Each of the possible products is evaluated through the Sustainability

Scorecard system which adds on to the IWAY standard requirements.290

Such evaluation results in an actual score of the product, which tells how

sustainable the product is. Such evaluation is currently based on mostly

environmental criteria, because IWAY, which is a necessary prerequisite for

every business partner, is covering the social and working part. Through 287 See also: IKEA, IKEA Group Sustainability Report FY2014, 2015. Available at: www.ikea.com/ms/en.../ikea-group-yearly-summary-fy14.pdf, (18.8.2015).288 See the EU section.289 To mention some: market analysis, which can be country/segment oriented, tender process to simply scan to market, electronic auctions, etc.290 See more in IKEA Group Sustainability report FY2014, 2015. Page 37.

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this IMS makes sure that all aspects are taken into consideration while

deciding amongst different products or services. The higher the

Sustainability Scorecard result is, the bigger the chances the product/service

has.

If we bring this example into the terminology of PP, IWAY can be linked to

basic prerequisites or principles, such as Art. 18(2) of the new EU

Directive291 or even conditions of performance of the contract, as it

prescribes the minimum standards; and the Sustainability Scorecard

resembles the contract award criteria. However, these public and private

procurement tools cannot simply be designated as the same, because there

are significant differences. IWAY on the one hand, has a strong

enforcement mechanism with a global reach of auditors and a compliance

team, whereas securing principles or conditions of performance in PP

transnationally can on the other hand, clash with numerous legal and

administrative restraints, lack of financial means and knowledge, and

perhaps lack of will to tackle relevant issues.

The Sustainability Scorecard lays out a numeric result of how sustainable

the product is, which makes it much easier to determine the best ones.292 In

this way, the company that actually invests time and money into producing

the most sustainable product will achieve a higher score and improve its

chances of being chosen. If the price of the product would be the only

criteria for awarding the contract, such companies would not have great

chances, as their price might be higher. For this reason it does not come as a

surprise, according to Wilson, that most of the companies are content with

the Scorecard system as their efforts to be more sustainable are being

recognized which would not happen in price-only consideration.

Nevertheless, there is still room for improvement in the Sustainability

Scorecard system by including working conditions. IWAY does secure the

minimum of rights293 and this is a precondition for every service or product

291 See section 3.1.1.292 However, we need to keep in mind that Sustainability Scorecard so far only covers environmental criteria, which is much easier to put in numbers than social and working conditions and rights. This is certainly an area of a big possibility for improvement at IKEA.293 Based on the core ILO conventions.

96

provider to be considered, but including the level of respect for rights at

work and working conditions (and not just yes/no or respect/disrespect) into

Sustainability Scorecard would actually recognize those that are raising the

bar in labour standards.294

However, it needs to be kept in mind that we are still talking about a

business case. In a current economic system, a company introducing tools

which secure respect for environmental and labour standards has to be

considered to be at the top end of corporate social responsibility scale. And

current tools of public purchasing in this case, fall behind due to several

reasons – relative rigidness of public authorities, legislative restraints, lack

of funds and knowledge, etc. But nothing should hold back public

authorities from looking into and using methods from private companies

that have been proven to work well. Such cooperation and knowledge

sharing should become more common in the future, as we can already see

some individual examples – National Audit Office of the UK conducted a

study on open-book accounting and supply chain assurance for which it

visited nine institutions (private companies and public authorities) in order

to understand how they use supplier information to manage contracts so that

the government can draw on their experience when considering these

issues.295

By no means are we trying to argue that PP should follow the same

principles as the private procurement, but to adopt those that bring

sustainable results for the society and that can still be aligned with the

principles of PP as we know it today.

Overall, it is necessary to keep in mind that by comparing public and private

procurement we are dealing with two subjects in diametrical situation. One

of the basic principles of modern law stipulates that public authorities are

294 E.g. IWAY demands compliance with nationally/locally set minimum wage; scorecard system could award more points to the company which pays its employees a living wage.295 The National Audit Office, Open-book accounting and supply-chain assurance, Report by the Comptroller and Auditor General, 2015. The report is available at: http://www.nao.org.uk/wp-content/uploads/2015/07/Open-book-accounting.pdf, (18.8.2015). And The National Audit Office, Open-book accounting and supply-chain assurance: case studies, Report by the Comptroller and Auditor General, 2015. The report is available at: http://www.nao.org.uk/wp-content/uploads/2015/07/Open-book-accounting-case-studies.pdf, (18.8.2015).

97

only allowed to take those actions that legislation gives mandate for;

whereas private actors are allowed to do anything that is not forbidden by

the law.296 The rationale behind this principle is certainly righteous –

preventing public authorities to act arbitrarily and perhaps use its power for

purposes that are not in the interest of the people and go against human

rights. However, this principle is based on presumption that the legislation

that prescribes actions that are permissible to public authorities is based on

the best interest of the citizens. Applying this to the case of PP legislation,

which often limits public authorities to do what would be good for the

general society (buy in a socially responsible way), leaves us with only one

possible conclusion - current PP regulation which is predominantly based on

liberal market principles is not appropriate for ensuring the respect for

labour rights in the products concerned, because in the process of procuring,

labour standards are outweighed by economic considerations. It is not being

argued that liberal market principles should be abolished, but certainly to be

ranked in relation to other considerations in a way that would enable fairer

procurement.

296 Even though one might argue that with the emergence of soft law documents on business and human rights and especially UN Guiding Principles, companies have certain responsibilities that go beyond the legal requirements, i.e. respect for fundamental human rights.

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6. ConclusionThis thesis firstly attempted to explain why public authorities should use PP

for transnational promotion and advancement of labour rights and, secondly,

what are the possibilities and limitations to do so under the current

legislative setup.

It emerged that slowly but steadily, more and more mechanisms and

safeguards for securing respect for basic rights at work in the supply chain

are being implemented in the PP procedure. Or at least the need for their

adoption is being recognized, which is an improvement compared to a

decade or two ago. The actual progress, though, is certainly not aligned with

the speed with which part of the private sector is developing mechanisms to

secure sustainable management of the supply chain.

Regarding the question of whether current international legislation on PP is

able to secure socially sustainable procurement of goods, a clear one sided

answer is not possible. If one had to choose one, “no” seems more accurate

than “yes” at the moment. As we have seen in the case of the new EU

Directive, which is by far the most social sustainability-oriented

international PP legislation, the majority of provisions, including some sort

of social consideration, are voluntary. Even the promising principle for

respect for internationally recognized labour rights enshrined in Art. 18(2)

overall lacks clear ideas of responsibilities of the parties and enforcement

mechanisms. Social considerations are thus mostly left to the discretion of

the Member States and public authorities. One could possibly claim that

legislation is therefore flexible enough but, since provisions cannot be used

as they should, we have an obvious lack of legislative tools and mechanisms

(and the political will to create them, which is already part of a new

discussion).

US federal legislation on PP offers even less than the EU regulation and is

characterized by a piecemeal approach – entailing measures to prevent

procurement of products or services, which have been tainted with particular

violations of labour rights. But, due to depending on labour legislation and

99

relevant authorities to ensure a general respect for labour rights, there is no

general provision demanding respect for labour rights in relation to procured

services and goods, nor one instructing public purchasers to check for

compliance. And even less so for procurement of goods with transnational

supply chains.

Practical examples and good practices in securing sustainable PP in certain

countries certainly demonstrated that there are ways within current

legislative frameworks to, for example, inquire about labour conditions,

demand information regarding the supply chain, and to eventually improve

certain labour standards (as with the case of child labour in the production

of Swedish surgical tools) but, overall, such examples are all too rare and

illustrate some fundamental difficulties of achieving socially sustainable

procurement in the current legal framework. Difficulties are certainly not

just legislative ones; nevertheless, legislation only mirrors basic societal

and, in this case, economic principles. But let us stay with legislation for a

bit longer.

Given the fact that we already encountered enormous legal obstacles that

would secure respect for at least core labour rights in transnational

procurement of products, it must not come as a surprise that the success in

PP tools that would actually promote the advancement of labour rights

(raising the bar above the minimum) is even significantly lower. The reason

behind it might simply be that the development in socially responsible PP is

not advanced enough for public authorities to award the contract to the

economic operator that secures better standards for their workers than other

bidders. Of course, this would be an opposite extreme of awarding the

contract to the bidder with the lowest price, in a sense that there might not

be an upper limit for labour standards (as there is theoretically no bottom

limit to price).297 For a proper solution, a balance between both should be

struck. As of now, current legislative framework still gives vastly greater

advantages to the price factor which, on the other hand, makes securing at

297 For this reason, abnormally low tenders can be rejected in EU procurement. See EU chapter.

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least minimal labour standards in PP a struggle and awarding better labour

standards only a distant wish.

What is clear, overall, is that PP rules are still, in the greater part, committed

to securing a transparent and efficient procedure, whose purpose is to fairly

assess which tender is the best on predominantly economical and qualitative

criteria. It is rather self-evident that including labour clauses (especially for

products with extensive and transnational supply chains) might contradict

some current basic PP principles or objectives – for example, running an

efficient and economical procedure. Whether checking for compliance with

minimal labour standards in the supply chain or evaluating labour standards

as one of the criteria for awarding public contracts, such additions certainly

do not contribute to faster and more efficient procurement processes, but

create quite the opposite effect. Naturally, such processes can be

standardised and rationalized to a certain extent, but at some point, a balance

needs to be struck.

A balance will in fact have to be struck on a wider level, if we eventually

want to come closer to a more sustainable PP. Awarding the contract to the

bid with the lowest price has been close to a rule for years and it is

practically incompatible with socially sustainable PP.298 Low costs are

(amongst other factors) based on low labour standards and raising their level

inevitably leads to higher prices, at least to a certain extent. It is therefore up

to the governments and public authorities to decide whether they want to

procure sustainably or not. Having a legal basis to do so is just one part of

the quest; actual (financial) enablement is the other part.299

One further point regarding the compatibility of the modern PP principles

with sustainable procurement is PP’s role within the market. PP is one of the

foundations of the single market in the EU and is for similar reasons

regulated on the WTO level as well. It was beyond the scope of this thesis to

analyse all potential obstacles to sustainable PP, however, certain court

298 Unless a rigorous scanning of labour standards at the earlier stages of PP process that would exclude all bids that do not meet the standard threshold would exist. 299 Throughout the thesis other practical impediments to socially sustainable PP were mentioned, like time aspect and knowledge of public purchasers, but due to the research question being legally oriented, we did not examine practical obstacles in detail.

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cases demonstrated that single market/free trade provisions can have a

significant negative (or limiting) effect on labour standards. This is highly

important since most of the international legislation on PP comes from the

international organisations, whose purpose and tasks are market related, and

are thus prone to putting market principles in front of other pursuits. This is

another area where balance needs to be struck in order to enable a level

playing field where demand for a certain level of respect for labour

standards in PP will be discussed as a necessary prerequisite and not as a

limitation to the free market.

Overall, respect for labour (and human) rights in PP in general is far from

the standard that the international community is trying to impose on private

companies, and far from the standard of Principle 6 of the UN Guiding

Principles on Business and Human Rights. Some kind of legal avenues and

practical solutions for conducting due diligence in PP of goods will

eventually have to be introduced, otherwise provisions as we have them

now cannot have meaningful effects. What this thesis has been arguing for

is actually a step forward from Principle 6 that urges states to “promote

human rights by business enterprises with which they conduct commercial

transactions.” Sustainable PP should not just promote, but also ensure that

rights have been respected in regard to the object of the contract (and

potentially reward better practices and thus foster improvement). Respect

for labour rights should not be a good thing to do or one of the possible

strategic effects of PP, but a necessary prerequisite to compete for a public

contract. Also, in the case of goods with extensive transnational supply

chains – legal mechanisms to secure sustainable PP will be created only

when the long-term societal effect of respect for labour rights will be valued

higher than short-sighted quest for a low price.

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7. Bibliography

7.1 LiteratureAlvarez-Fernandez, A. and Brandstrup, P., The access of third countries to the European Union’s public procurement market, student working paper, Maastricht University, Maastricht Centre for European Law, 2013.

Arrowsmith, S., Linarelli, J. and Wallace, D.: Regulating Public Procurement: National and International Perspectives, 1st edition, Kluwer Law International, 2000.

Arrowsmith, S., The Law of Public and Utilities Procurement, 3rd edition, Sweet & Maxwell, 2014.

Augenstein, D., and Kinley, D., When human rights ‘responsibilities’ become ‘duties’: the extra-territorial obligations of states that bind corporations, in Bilchitz and Deva (eds.), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? Cambridge University Press, 2013; Sydney Law School Research Paper No. 12/71.

Barnard, C., A Proportionate Response to Proportionality in the Field of Collective Action, European Law Review, 2012. Vol. 37 no. 2, p. 117-135.

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Brodie, D., A History of British Labour Law 1867-1945, Hart Publishing, 2003.

Bruun, N., Jacobs, A. and Schmidt, M.: ILO Convention No. 94 in the aftermath of the Ruffert case, European Review of Labour & Research, 2010. Vol. 16 Issue 4, p. 473-488.

Burkhauser, R. and Haveman, R., Disability & Work: The Economics of American Policy, The Johns Hopkins University Press, 1982.

Coomans, F., Application of the International Covenant on Economic, Social and Cultural Rights in the Framework of International Organisations, Max Planck Yearbook of United Nations Law, 2007. Vol. 11, p. 359-390.

Dølvik, J. E., and Visser, J., Free movement, equal treatment and workers’ rights: can the European Union solve its trilemma of fundamental principles?, Industrial Relations Journal, Blackwell Publishing Ltd., 2009. Vol. 40 No. 6, p.491–509.

Hallo de Wolf, A. G., Reconciling Privatization with Human Rights. Antwerpen: Intersentia, International Law Series, 2011.

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Hettne, J., Sustainable Public Procurement and the Single Market – Is There a Conflict of Interest? EPPPL 1, 2013.

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Jensen, H. B., From economic to sustainable development: Unfolding the concept of law, Systems Research and Behavioural Science, 2007. Vol. 24 Issue 5.

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McCrudden, C., Public Procurement and Corporate Social Responsibility; in McBarnet, Voiculescu, and Campbell (eds.), The New Corporate Accountability: Corporate Social Responsibility and the Law. Cambridge University Press, 2007. P. 93-118.

Schlemmer-Schulte, S., Fragmentation of International Law: The Case of International Finance & Investment Law Versus Human Rights Law, Pacific McGeorge Global Business & Development Law Journal, 2012. Vol. 25 Issue 1, p. 409-424.

Schwartz, D., Consuming Choices: Ethics in a Global Consumer Age, 1st edition, Rowman & Littlefield Publishers, 2010.

Semple, A., The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?, European Law Conference at University of Oslo, 2014.

Simpson, F., Labour Rights Protections within International Trade: A study of Free Trade Agreements and Generalised Systems of Preferences, Master Thesis, Lund University, 2015.

Syrpis, P., Reconciling Economic Freedoms and Social Rights - The Potential of Commission v Germany (Case C-271/08 Judgment of 15 July 2010). Industrial Law Journal, 2011. Vol. 40, p. 222-229.

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Thrasher, R., On Fairness and Freedom: The WTO and Ethical Sourcing Initiative. GEGI Working Paper Series, Global Economic Governance Initiative, 2014.

Tosoni, L., The Impact of the Revised WTO Government Procurement Agreement on the EU Procurement Rules from a Sustainability Perspective, European Public Private Partnership Law Review, 2013. Issue 1, pp. 41-48.

Van Daele, A., International Labour Rights and the Social Clause: Friends Or Foes, 1st edition, Cameron May, 2005.

Van Der Abeele, E., Integrating Social and Environmental Dimensions in Public Procurement: One Small Step for the Internal Market, One Giant Leap for the EU?, European Trade Union Institute (ETUI), 2014.

Vinterskoug, J., The Scope of Labour Law Requirements in Public Procurement - at the ILO, EU and Swedish Level. Master Thesis, Lund University, 2011.

7.2 Legislation and Treaties

7.2.1 UN1 UNTS XVI. United Nations, Charter of the United Nations, 24.10.1945.

UN General Assembly, International Covenant on Civil and Political Rights, United Nations, Treaty Series, vol. 999, 16.12.1966.

UN General Assembly, International Covenant on Economic, Social and Cultural Rights, United Nations, Treaty Series, vol. 993, 16.12.1966.

7.2.2 EUConsolidated version of the Treaty on the Functioning of the European Union. OJ 2008 C 115/47, 9.5.2008.

Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors.

Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts.

Directive 2014/23/EU of the European Parliament and of the Council on the award of concession contracts.

Directive 2014/24/EU of the European Parliament and of the Council on public procurement and repealing Directive 2004/18/EC.

Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sector and repealing Directive 2004/17/EC.

Directive 2014/67/EU of the European Parliament and of the Council of 15 May 2014 on the enforcement of Directive 96/71/EC concerning the posting of

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workers in the framework of the provision of services and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System.

Rules on public works contracts, public supply contracts and public service contracts, applicable until 2016. Summaries of EU legislation. Available at: http://europa.eu/legislation_summaries/internal_market/businesses/public_procurement/l22009_en.htm, (25.2.2015).

7.2.3 ILOILO Convention no. 100, on Equal remuneration, 1951.

ILO Convention no. 105 on Abolition of Forced Labour, 1957.

ILO Convention no. 111 Discrimination (Employment and Occupation), 1958.

ILO Convention no. 138 on Minimum Age Convention, 1973.

ILO Convention no. 182 on Elimination of the Worst Forms of Child Labour, 1999.

ILO Convention no. 29 on Forced Labour, 1930.

ILO Convention no. 87 on Freedom of Association and Protection of the Right to Organize, 1948.

ILO Convention no. 94 on Labour Clauses in the Public Contracts, 1949.

ILO Convention no. 98 on Right to Organize and Collective Bargaining, 1949.

ILO Declaration on Fundamental Principles and Rights at Work, 1998.

ILO Recommendation no. 111 Discrimination (Employment and Occupation), 1958.

7.2.4 WTOWTO, Agreement on Government Procurement, GPA/W/313, 16.10.2010.

WTO, (Marrakesh) Agreement Establishing the World Trade Organization, 1867 UNTS 154, Apr. 15, 1994.

7.2.5 USCalifornia Transparency in Supply Chains Act, S.B. 657.

Fair Pay and Safe Workplaces, Executive Order 13673.

Federal Acquisition Regulation, 48 C.F.R.

Federal Property and Administrative Services Act, 40 U.S.C.

Omnibus Appropriations Act for Fiscal Year 1999, 105th Congress Public Law 277.

Prohibiting Discrimination Based on Sexual Orientation and Gender Identity, Executive Order 11246.

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Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, Executive Order 13126.

San Francisco Food Policy, Executive Directive No. 09-03.

Strengthening Protections against Trafficking in Persons in Federal Contracts, Executive Order 13627.

Trade Act, 1974.

Trafficking Victims Protection Act of 2000, 22 U.S.C. 7102.

U.S. Foreign Corrupt Practices Act, 15 U.S.C., 1998.

US Constitution.

Wagner-O'Day Act, PL 739.

7.2.6 OtherCouncil of Europe, European Social Charter (Revised), 3.5.1996, ETS 163.

Council of Europe, European Social Charter, 18.10.1961, ETS 35.

Malaysia: Federal Constitution, 31 August 1957.

UK, Committee on Government Contracts, Fair Wages Resolutions, 1897.

UK, The Public Contracts Regulations 2015.

7.3 Caselaw

7.3.1 EUECJ, Case C-158/91, Ministère public et Direction du travail et de l’emploi v. Jean-Claude Levy.

ECJ, Case C-341/05, Laval Un Partneri Ltd v Svenska Byggnadsarbetareförbundet.

ECJ, Case C-346/06, Dirk Rüffert v Land Niedersachsen.

ECJ, Case C-368/10, European Commission v. Kingdom of the Netherlands.

ECJ, Case C-438/05, International Transport Workers Federation v Viking Line ABP.

7.3.2 OtherCrosby v. National Foreign Trade Council, 530 U.S. 363 (2000).

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7.4 Secondary Legislation, Reports and Preparatory Work

7.4.1 UNA/HRC/11/13. Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises. Human Rights Council, Business and Human Rights: Towards Operationalizing the “Protect, Respect and Remedy” Framework. 11th Session, 22.4.2009.

A/HRC/17/31. Report of the Special Representative of the Secretary- General on the issue of human rights and transnational corporations and other business enterprises. Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework. 17th Session, 21.3.2011.

CRC/C/GC/16. UN Committee on the Rights of the Child, General comment No. 16 (2013) on State obligations regarding the impact of the business sector on children’s rights. Adopted by the Committee at its 62nd session, 2013.

ILO, Labour Clauses in Public Contracts, International Labour Conference 97th Session, 2008.

ILO, Summary Report, 2014 Interagency Roundtable on CSR, Sustainable public procurement as a tool for promoting responsible business, 19 November 2014, Geneva.

Open Working Group proposal for Sustainable Development Goals. Available at: https://sustainabledevelopment.un.org/sdgsproposal, (15.3.2015).

U.N. Doc. E/1991/23. UN Committee on Economic, Social and Cultural Rights, General Comment 3, The nature of States parties' obligations. 5th Session, 1990.

UN Doc. E/1999/22. The Committee on Economic, Social and Cultural Rights, Report on the 18th and the 19th session.

United Nations Commission on International Trade Law, UNCITRAL Model Law on Public Procurement, 1.7.2011.

7.4.2 EUEU, Opinion of Advocate General Kokott delivered on 15 December 2011. Case Case C-368/10 of European Commission v Kingdom of the Netherlands.

European Commission, Buying Social, A guide on taking account of social considerations in public procurement, 2011.

European Commission, Europe 2020 Strategy for Smart, Sustainable and Inclusive Growth. Available at: http://ec.europa.eu/europe2020/index_en.htm, (10.6.2015).

European Commission, Green Paper on the modernisation of EU procurement policy; Towards a More Efficient European Procurement Market. COM(2011) 15 final, 27.01.2011.

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European Commission, Interpretative Communication 2001/C 333/08 of the Commission on the Community law applicable to public procurement and the possibilities for integrating social considerations into public procurement, 2011.

European Commission, Public Procurement Indicators 2010. Available at: http://ec.europa.eu/internal_market/publicprocurement/docs/indicators2010_en.pdf, (7.3.2015).

Kahlenborn, W., Moser, C., Frijdal, J. and Essig, M., Strategic Use of Public Procurement in Europe, Final Report to the European Commission MARKT/2010/02/C. Adelphi, 2011.

Steurer, R., Berger, G., Konrad, A. and Martinuzzi, A., Sustainable Public Procurement in EU Member States: Overview of government initiatives and selected cases. Final Report to the EU High-Level Group on CSR, Vienna, October 2007.

Study on Precarious work and social rights Carried out for the European Commission, (VT/2010/084), Working Lives Research Institute, London Metropolitan University.

7.4.3 USBurrows, V. and Manuel, K., Presidential Authority to Impose Requirements on Federal Contractors, Congressional Research Service Report for Congress, 14.6.2011.

United States Department of Labor, Office of the Secretary of Labor, Notice of Final Determination Updating the List of Products Requiring Federal Contractor Certification as to Forced or Indentured Child Labor Pursuant to Executive Order 13126, 75 FR 42164.

United States Department of State, Bureau of Democracy, Human Rights, and Labor, U.S. Government Approach on Business and Human Rights, 2013.

United States Health, Education, Labor, and Pensions Senate Committee: Acting Responsibly? Federal Contractors Frequently Put Workers’ Lives and Livelihoods at Risk, Majority Committee Staff Report, 11.12.2013.

7.4.4 OtherCrown Commercial Service, A Brief Guide To The EU Public Contracts Directive, publication, February 2015.

Norwegian Agency for Public Management and eGovernment (Difi), Walk the Talk: Ensuring Socially Responsible Public Procurement, 2014.

OECD, OECD Principles for Integrity in Public Procurement, 2009.

The Macbride Principles, by Father Sean McManus, President, Irish National Causus, December 1997. Available at: http://www1.umn.edu/humanrts/links/macbride.html, (18.3.2015).

The National Audit Office, Open-book accounting and supply-chain assurance, Report by the Comptroller and Auditor General, 2015. The report is

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available at: http://www.nao.org.uk/wp-content/uploads/2015/07/Open-book-accounting.pdf, (18.8.2015).

The National Audit Office, Open-book accounting and supply-chain assurance: case studies, Report by the Comptroller and Auditor General, 2015. The report is available at: http://www.nao.org.uk/wp-content/uploads/2015/07/Open-book-accounting-case-studies.pdf, (18.8.2015).

7.5 WebpagesBureau of International Labor Affairs, section DOL Home, sub-section ILAB, sub-section Reports, sub-section Child Labor & Forced Labor, sub-section List of Products Produced by Forced or Indentured Child Labor, 1.12.2014. Available at: http://www.dol.gov/ilab/reports/child-labor/list-of-products/index-country.htm, (25.5.2015).

Business & Human Rights Resource Centre, section Binding Treaty. http://business-humanrights.org/en/binding-treaty, (3.3.2015).

CSR Roundtable, Inter-agency roundtable on Corporate Social Responsibility. http://www.csrroundtable.org/, (7.5.2015).

Electronics Watch. http://electronicswatch.org/en/, (22.8.2015).

IKEA. http://www.ikea.com/, (14.9.2015).

Norwegian Agency for Public Management and eGovernment (Difi), section English, sub-section Socially Responsible Public Procurement, sub-section Information about High-Risk Products. http://www.anskaffelser.no/sosialt-ansvar/information-english/high-risk-products, (12.8.2015).

OECD, section Investment, sub-section Guidelines for Multinational Enterprises, sub-section National Contact Points for the OECD Guidelines for Multinational Enterprises. http://www.oecd.org/investment/mne/ncps.htm, (12.9.2015).

Sustainable Purchasing of the International Organization for Standardization, ISO/CD 20400. http://www.iso.org/iso/home/news_index/news_archive/news.htm?refid=Ref1873, (5.7.2015).

Sweatfree Purchasing Consortium, http://buysweatfree.org/, (21.8.2015).

UN Millennium Goals. http://www.un.org/millenniumgoals/, (7.3.2015).

UN Sustainable Development Goals. https://sustainabledevelopment.un.org/topics/sustainabledevelopmentgoals, (7.3.2015).

UN, section Global Issues, sub-section Briefing Papers, sub-section Child Labour. Available at: http://www.un.org/en/globalissues/briefingpapers/childlabour/intlconvs.shtml, (25.6.2015).

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United Nations Human Rights, Office 0f the High Commissioner for Human Rights, section Business, subsection National action plans. http://www.ohchr.org/EN/Issues/Business/Pages/NationalActionPlans.aspx, (10.3.2015).

United States Environmental Protection Agency, section Sustainable Marketplace: Greener Products and Services, sub-section Environmentally Preferrable Purchasing Programme. http://www.epa.gov/greenerproducts/about-environmentally-preferable-purchasing-program, (12.9.2015).

7.6 InterviewsHenrik Wilson, IMS Sustainability Manager at IKEA Services AB, which was conducted on May 4th 2015 in Helsingborg, Sweden.

Jörgen Hettne, Institutionen för handelsrätt, Lund University, 11.8.2015, Lund, Sweden.

7.7 News mediaAltschuller, S., H.R. 3226: New Bill Calls for Transparency on Trafficking and Slavery in Corporate Supply Chains, newsletter, 4.8.2015, Foley Hoag LLP. Available at: http://www.csrandthelaw.com/2015/08/04/h-r-3226-new-bill-calls-for-transparency-on-trafficking-and-slavery-in-corporate-supply-chains/, (6.8.2015).

Borenstein, S., Congress Debates Whether Lawbreakers Should Receive Contracts Many Still Get Government Money Despite Guilty Pleas Or Settlements. Strict Interpretation Of The Rules Could Disqualify 23 Of The Top 25. Article, Inquirer Washington Bureau, 22.7.2000. Available at: http://articles.philly.com/2000-07-22/business/25610736_1_contractors-joshua-gotbaum-violations-of-federal-tax, (23.6.2015).

Duvall, R., Elling, T. and Taylor, T., Public procurement in the United States: overview, Holland & Knight LLP, 2013. Available at: http://us.practicallaw.com/3-521-7446?q=&qp=&qo=&qe, (19.8.2015).

Farhat, V., Shepherd, W. and Canale, J., United States: Proposed Anti-Human Trafficking Rule Could Significantly Affect Contractor Compliance Programs, newsletter, January 8, 2014, Holland & Knight LLP. Available at: http://www.hklaw.com/publications/proposed-anti-human-trafficking-rule-could-significantly-affect-contractor-compliance-programs-01-08-2014/, (1.8.2015).

Gillis, N., Guidelines on Sustainable Public Procurement by U.S. Government, speech from 26.4.2012, Youtube. Available at: https://www.youtube.com/watch?v=zMCvWUYoDJQ, (12.6.2015).

Grete Solli – experiences from socially responsible public procurement, video, Difi, January 2015. Video available at: https://vimeo.com/112149202, (15.8.2015).

Healthier procurement, video, Swedwatch, 2015. Available at: https://vimeo.com/122554492, (22.8.2015).

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International Corporate Accountability Roundtable, Executive Order on Trafficking in Persons. Available at: http://hrdd.icar.ngo/content/executive-order-trafficking-persons, (28.7.2015).

International Labor Rights Forum, Dignity and Justice for Workers Worldwide, PowerPoint presentation, 2015. Available at: http://www.laborrights.org/publications/government-procurement-and-rights-workers-contractors%E2%80%99-supply-chains, (26.6.2015).

Irwin, J., Ethical Consumerism Isn’t Dead, It Just Needs Better Marketing, online article, Harvard Business Review, January 12th, 2015. Available at: https://hbr.org/2015/01/ethical-consumerism-isnt-dead-it-just-needs-better-marketing, (15.8.2015).

Ittig, K. and Witten, S., Preparing for New Anti-Human Trafficking Rules for Federal Contractors and Subcontractors: What Companies Need to Know about Obligations, Implementation, and Enforcement, PowerPoint presentation, March 12, 2014, Arnold & Porter LLP. Available at: http://www.arnoldporter.com/events.cfm?action=view&id=924, (1.8.2015).

Künnemann, R. The Extraterritorial Scope of the International Covenant on Economic, Social and Cultural Rights. Forum for a New World Governance, 2001. Available at: http://www.world-governance.org/article48.html, (13.3.2015).

Lynch, G., Public Procurement: Principles, Categories and Methods, available at: https://leanpub.com/procurement-principles-categories-and-methods, (20.3.2015).

Lynch, G., Public Procurement: Principles, Categories and Methods, e-read, 26.7.2013. Available at: https://leanpub.com/procurementintroduction/read, (25.3.2015).

Massachusetts Burma Procurement Law Challenged at WTO, available at: http://www.citizen.org/trade/article_redirect.cfm?ID=11103, (19.3.2015).

Nakashima, E., Clinton Contractor Rule Is Suspended, article, The Washington Post, 31.3.2001. Available at: http://www.washingtonpost.com/archive/politics/2001/03/31/clinton-contractor-rule-is-suspended/98aeef4a-99d8-4d3b-901a-c1665db6585c/, (23.6.2015).

Public Contracts Regulations: Government getting it badly wrong on public procurement, Matt Dykes, blog. http://touchstoneblog.org.uk/2015/03/public-contracts-regulations-government-getting-it-badly-wrong-on-public-procurement/, (14.7.2015).

Roth, M., Sullivan Principles, news article, The Encyclopedia of Greater Philadelphia, Rutgers University, 2013. Available at: http://philadelphiaencyclopedia.org/archive/sullivan-principles/, (24.3.2015).

Schulten, T., Renaissance of Pay Clauses in German Public Procurement and the Future of the ILO Convention 94 in Europe. Global Labour Column, Number 91, 2012. Available at: http://column.global-labour-university.org/2012/01/renaissance-of-pay-clauses-in-german.html, (18.5.2015).

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Use of Fair Trade labels in procurement decisions – Court of Justice of the EU in Max Havelaar, Geert van Calster, blog. http://gavclaw.com/2012/06/27/use-of-fair-trade-labels-in-procurement-decisions-court-of-justice-of-the-eu-in-max-havelaar/, (2.5.2015).

Wheeler, L., House bill would force businesses to detail anti-trafficking efforts, article, 27.7.2015, The Hill. At: http://thehill.com/regulation/249328-house-bill-would-force-businesses-to-report-anti-trafficking-policies, (2.8.2015).

White, S., The Top 175 Global Economic Entities, 2011. Available at: http://dstevenwhite.com/2012/08/11/the-top-175-global-economic-entities-2011/, (7.3.2015).

Why we must put the new Public Procurement Regulations on hold, Allison Roche. http://leftfootforward.org/2015/02/why-we-must-put-the-new-public-procurement-regulations-on-hold/, (14.7.2015).

7.8 OtherEuropean Trade Union Confederation, ETUC Key Points for the Transposition of the Directive 2014/24/EU, ETUC Publication, 2014.

IKEA, IKEA Group Sustainability Report FY2014, 2015. Available at: www.ikea.com/ms/en.../ikea-group-yearly-summary-fy14.pdf, (18.8.2015).

IKEA, IKEA's Planet & People Positive Sustainability Strategy, 2013. Available at: http://www.ikea.com/ms/en_GB/this-is-ikea/people-and-planet/index.html, (10.8.2015).

IKEA, IWAY Standard requirement 5.1, 2012. Available at: http://supplierportal.ikea.com/doingbusinesswithIKEA/sustainability/betterlifeforpeopleandcommunities/Documents/Forms/DispForm.aspx?ID=2, (10.8.2015).

Morton, A., EU Reform of Transnational Posted Workers Law and the Place of Working Eights and Collective Agreements within the Single European Market, European Public Services Briefings 5. European Services Strategy Unit, 2013.

Ruggie, J., A UN Business and Human Rights Treaty? An Issues Brief, Harvard Kennedy School, 28.1.2014.

Stumberg, R., Ramasastry, A. and Riggensack, M., Turning a Blind Eye? Respecting Human Rights in Government Purchasing, International Corporate Accountability Roundtable, September 2014.

Swedwatch, Healthier procurement, Improvements to working conditions for surgical instrument manufacture in Pakistan, report n. 73, 2015. The report available at: http://www.swedwatch.org/en/reports/healthier-procurement, (22.8.2015).

Swedwatch, Vita rockar och vassa saxar. En rapport om landstingens brist på etiska inköp, report n. 16, 2007. The report is available only in Swedish language at: http://www.swedwatch.org/sv/rapporter/daliga-forhallanden-bakom-tillverkning-av-klader-och-kirurgiska-instrument, (22.8.2015).

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The International Labor Rights Forum, Protecting Human Rights through Government Procurement, Recommendations for Responsible Supply Chain Management, Corporate Accountability, and Worker Access to Remedy in US Government Procurement, May 2015.

World Vision, Creating Markets for Child-Friendly Growth, Addressing child labour through G20 public procurement, policy report, April 2014.

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