Settlement Reached in Groundbreaking Bangladesh Accord Arbitration

To:WRC Affiliate Universities and Colleges
From:Scott Nova and Ben Hensler
Date:February 7, 2018
Re:Settlement Reached in Groundbreaking Bangladesh Accord Arbitration

Worker representatives and a major international apparel brand have reached a settlement in the first-ever arbitration proceeding under the Accord on Fire and Building Safety in Bangladesh.  This successful settlement helps advance the Accord’s central purpose: ensuring that covered factories are made fully safe.

The case against the brand was being administered at the Permanent Court of Arbitration in The Hague at the time the settlement was reached. You can read news coverage of the settlements herehere, and here.

The exact details of the settlement, including the identity of the brand, are subject to confidentiality, as is typical in international arbitrations, but some key facts have been made public. The case, brought by the global unions IndustriALL and UNI, hinged on whether the brand met its obligation to require its supplier factories to remediate safety hazards within the mandatory deadlines imposed by the Accord, and to negotiate commercial terms to make it financially feasible for these suppliers to cover the costs of remediation. The brand involved agreed to pay $2 million to help its supplier factories complete essential safety renovations

This follows an earlier settlement, with another international brand, in a case that hinged on similar issues. In that case, the brand also agreed to make substantial funds available for remediation work, although the amount is not disclosed.

As you know, the Accord is a departure from the voluntary “corporate social responsibility” model, which too often has been ineffective at addressing intractable labor rights problems like the garment factory safety crisis in Bangladesh. Like university labor codes, the Accord is, instead, a binding agreement. The 217 brands and retailers that signed the Accord are contractually obligated to fulfill their commitments to ensure factory safety, including the commitments at the heart of these arbitration cases.

The Accord is enforceable—and, as these settlements show, it is being enforced. This is one of the primary reasons why the initiative has succeeded in actually making garment factories in Bangladesh safer for workers.

It is important to understand that these arbitration cases, as well as a number of other enforcement actions pending against other brands that have not yet come to arbitration, do not just affect the individual brand that is the subject of a given case. They send a powerful message to all Accord signatory brands: that compliance with their commitments under the Accord is not optional and that there are consequences when these commitments are not met. In this way, the Accord enforcement process, which the global union signatories, IndustriALL and UNI, have been utilizing in a robust manner for more than two years, has been a powerful motivator for action on factory safety by all of the Accord’s signatory brands.

When the first enforcement actions under the Accord were brought by the global unions in 2015, progress on fire and building safety was frustratingly inadequate, with only 33% of identified hazards corrected across the Accord’s 1,650 covered factories. Today, due in no small part to these enforcement efforts, 84% of hazards have been corrected, including major improvements in almost every Accord factory. Over 100,000 safety renovations, repairs, and upgrades have been implemented, from installation of fire doors to replacement of shoddy electrical wiring, to strengthening of weak structural columns.

As a result, more than 2.5 million garment workers now go to work every day in vastly safer factories. When the Accord began, virtually every export garment factory in Bangladesh had lockable doors and gates on its emergency exit routes, a grave hazard that can trap workers trying to escape a burning building and was a crucial factor in many of the mass fatality disasters of the pre-Accord years. Today, lockable doors and gates have been removed from 96% of Accord factories. Also crucial to the ability of workers to escape a fire, 87% of Accord factories now have emergency lighting on exit routes that fully meet international standards. In more than 80% of Accord factories, all electrical wiring and cables across the building are now fully up to code, drastically reducing the short circuits and overloads that are the main cause of factory fires in the industry.

As we have reported before, substantial remediation work still remains to be completed, much of it well behind original schedules. We believe the announcement of these successful arbitration settlements will give the Accord’s brands and retailers additional motivation to step up renovation efforts over the final months of the original 2013 agreement, before the renewed Accord, whose term runs until 2021, takes effect in June 2018.

It should be noted that the Accord’s enforcement mechanism is still a work in progress. The arbitration proceedings brought by the global unions, while ultimately successful, proved slower and less transparent than is appropriate when vital human rights issues, like the safety of workers, are the matter at hand. For this reason, some changes have been made in the renewed Accord that are designed to improve the enforcement process, by empowering the Accord’s staff to take a more active role in assessing where signatory brands may be falling behind on their commitments, and recommending corrective measures.

We will have further updates to share on the Accord in the months ahead, including a detailed review of the status of safety repairs at factories making university logo goods and an update on which university licensees sourcing from Bangladesh have signed the renewed Accord and which have not.

The Accord represents a new model of labor rights enforcement—one defined by binding obligations for brands, including a commitment to share the cost of producing under safe conditions. We are encouraged to see the concrete results of the WRC’s years of involvement in the conception, creation, and implementation of the Accord, including its groundbreaking dispute resolution mechanism.

As always, please let us know if you have any thoughts or questions about this communication.

Scott Nova
Executive Director
Worker Rights Consortium

[email protected]