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1. Social Justice and Globalization, c. 1990—2020

As a child in the 1980s, the clothes I wore were manufactured in the country where I lived, Finland. As an adult in the 2020s, when I buy clothes to my own children, they are “designed” in Finland but manufactured in places such as Bangladesh, China and Vietnam. What happened, and what does this entail for any discussion of social justice and private law? One answer is that the fall of the Iron Curtain in the early 1990s seems to roughly coincide with a massive outsourcing of production from the Global North to the Global South. It is difficult to identify an exact point of time, but c. 1990 could be seen to symbolize an opening up of a world previously separated by intense rivalries. Ideals of free trade and development opened up a “global market” for producing goods and services instead of earlier markets that to a much larger degree corresponded to nation state boundaries. 

Global value chain capitalism is ostensibly built on the solid economic foundations of specialization for increased efficiency and the effective governance of outsourced production. The problem, then, comes from vast regulatory, technical, cultural, social and other differences, such as access to financial and other resources, between states. If the country from where production is outsourced has effective labor protections and access to low carbon emission energy, but the new host country of outsourced production does not, then outsourcing may lead to calamity on local and global scale, as witness by events such as the Rana Plaza disaster and global warming. As aspects of production move from the Global North to the Global South, social (and ecological, cultural, economic) justice must follow. With outsourcing taking place globally on an unprecedented scale, our ideas of social justice must also become global. 

2. A brief history of private law and social justice

To understand what can be done to fix the new status quo, we must turn to a historical perspective on private law. During the early stages of industrialization in the 19th and 20th centuries, Global North countries could, from today’s anachronistic perspective, be compared to Global South countries today. The decades-long transformation from primarily agricultural and self-subsistence focused economies to industrialized economies caused massive social change. As narrated in countless historical accounts from Horwitz to Kennedy, Atiyah and beyond, contract became a central tool of societal organization displacing previous mechanisms of social control. In short, instead of growing sustenance, ordinary people started selling their labor and buying their sustenance through contract

In the new context contract, however, provided a poor foundation for social justice. The illusion of two comparatively equal parties quickly shattered with the advent of massive contracting when companies claimed to contract with individual laborers, consumers, and small-scale suppliers, such as farmers, instead of, say, groups of actors of comparative power. Add to this that there were few of today’s institutional protections, such as universal healthcare, product safety and other social, labor and environmental protections for individuals in the rapidly transforming societies. The responses to the ills of industrialization were many, but crucially they were often dependent on a legal-substantive foundation—that private law would allow a cause of action for claimants to claim their rights, whether in relation to harmful products, labor infringements, unfair evictions or environmental harm. Without a claim for remedy due to damage caused, companies were effectively protected from responsibility for the harms they caused, and any response expected from a company would only amount to what could, anachronistically and derogatively, be called “corporate social responsibility”. 

The redevelopment of such legal foundations took decades. Ultimately, though, a principle that every contract must reflect societal fairness, whether described as a prohibition of unconscionable, unfair, or unreasonable contracts, was enshrined in the contract laws of most if not all Global North legal systems. Importantly, though, to make such principles functional in practice required extensive remedial frameworks, with examples such as specialized adjudication systems, from consumer and insurance ombudsmen and boards to specialized labor and insurance courts and compensation schemes, such as environmental compensation funds and auto-insurance schemes, providing just a handful of examples that were all seen as radical in their time. Importantly, again, without underlying substantive rights many such schemes are inadequate—thus, for example, the existence of product liability insurance is dependent on the existence of a product liability claim

3. Private law in today’s world of global value chains

Fast forward to the world of 1990. Companies are engaging in outsourcing with impunity, and thus have little regard for ensuring that adequate social (or environmental, or other non-bottom-line related) standards are put in place at outsourced facilities in what previously were the uttermost parts of the world but now, suddenly and very concretely, become everyone’s backyard. While the social ills of such outsourcing are quickly noticed, it takes law decades to establish a functional substantive foundation for legal claims against lead firms for harms caused by their inadequate governance of their value chains. 

Today, in October 2024, many of the procedural and substantive issues related to global value chain law have in principle been solved. Cases like Begüm v Maran, combined with regulations such as the European Corporate Sustainability Due Diligence Directive (“CSDDD”), are only emphasizing what is already a reality: that lead firms can be held liable for harm to third parties caused by their inadequate governance of their value chains. That said, there are still many practical parameters to be fixed to enable access to remedy. As highlighted by Article 29 of the CSDDD, limitation periods, cost rulings, availability of injunctive relief, representation of aggrieved parties by trade unions and other relevant actors, evidence procedures, and private international law constellations provide just few issues that can have crucial bearing on the practical availability of legal remedies and which the CSDDD now, to some extent, tries to recalibrate within the European Union. 

But even then, we are still far from guaranteeing as effective a system for avoiding social and other injustice in practice as in our own Global North societies. Again, taking the example of product liability, this is partly due to the continued evolution of product liability claims over several decades to place on all kinds of companies a strictish, continuously developing standard of liability for product related harms, and, partly, due to the institutional framework, for example in the form of functioning healthcare systems and insurance schemes. The latter half of the equation, perhaps, is now most crucial for true access to social justice from a practical, global perspective. 

4. New approaches to remediation of global injustice

We have come a long way to allow legal claims for harms caused by corporate outsourcing. To make good of what we have, we next need a remedial infrastructure to ensure that justice is maintained in practice. A remedial framework, akin to that already operating within Global North states for industrial era harms, from specialized boards and courts to compensation schemes and beyond, must be made available in today’s era of global value chain capitalism to balance injustice in practice. This is crucial not only for making it easier for aggrieved parties to receive remedy. For example insurance schemes, such as a conceivable production (not product) liability insurance, for anything from labor harms to outsize CO2 emissions, could act as an effective safeguard for avoiding harm in the first place. Insurance premiums rise due to harm that could have been avoided by due care or diligence, but even more importantly, insurance premiums may also rise due to what an insurer seems as a potentially risky lack of diligence even where such lack of diligence does not lead to damage per se. This would help provide lead firms a clear motive for investing in practices that ensure that harm does not arise in the first place. 

To be sure, globalizing remediation may seem like wishful thinking in today’s world. What can be said in return is that such remediation, for example compulsory road-traffic insurance, was for long seen as fanciful also in national settings even if it now has become a natural part of our societies. Towards this, in a transnational setting the Foreign Corrupt Practices Act may provide some kind of precedent with insurers now reportedly rolling out FCPA investigation coverage endorsements in insurance policies to complement earlier legal developments. Similar developments in relation to production liability might motivate companies to engage in adequate value chain governance for social justice issues despite the continuing practical difficulties for harmed third parties in raising such claims, boosting the prevention of harms to be remedied. Such schemes could also have other benefits, such as ramping up the effectivity of the litigation framework due to the resources that insurers have at their hands to study and litigate corporate conduct. Of course, they might also lead to new power imbalances, for example between insurers and harm sufferers, potentially requiring expanding access to already existing safeguards such insurance ombudsmen, boards and specialized tribunals. 

5. Conclusion

A law of global value chains seems by and large settled in that a company’s inadequate governance of its value chain can lead to claims for damages from diverse third parties suffering related harms. The CSDDD now requires European Union member states to develop the procedural infrastructure of such claims to allow for better access to remedy. Following historical developments within nation states for ensuring access to remedy, however, such substantive and procedural developments should also be increasingly coupled with other remediation frameworks. The construction of transnational remediation institutions might mirror the existing effectivity mechanisms of national remediation institutions put in place to counter the ills of industrialization in Global North states during the 20th century. This necessarily entails challenging political questions, but, for example, transnational production liability insurance could be a relatively simple place to start, potentially providing not only better remedies for harmed parties but also more effective, bottom-line focused oversight of companies’ value chain due diligence to ensure that harm does not as easily rise in the first place.

Art by Tomoko Nagao
Il quarto stato with motta, campari, pirelli, armani, prada, chicco, alitalia and visa at piazza duomo
2016 Digital contents
© 2024 TOMOKO NAGAO