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Legal and business news analysis - Aug/Sept 2019

Legal and business news analysis - August/September 2019

Fashion industry tackles exploitation six years after Rana Plaza tragedy

LUCY TREVELYAN

Six years after the collapse of the Rana Plaza building caused the tragic death of 1,138 workers in Bangladesh, the release of the 2019 Fashion Transparency Index indicates progress is being made in the industry, though there remains considerable work to be done.

The report – published by not-for-profit organisation Fashion Revolution in April 2019 – ranks 200 of the biggest global fashion brands and retailers according to how much information they disclose about their suppliers, supply chain policies and practices, as well as social and environmental impact. The aim is to increase transparency and hold companies to account for the human and environmental impacts of their business practices.

2019 marked the first year any brand has scored more than 60 per cent. However, at the other end of the spectrum, there are still a large number of well-known fashion brands that publicly disclose either nothing or very little about their human rights and environmental policies, practices and impacts, according to the report. ‘Almost a third of companies scored in the zero to ten per cent range,’ says Akil Hirani, Co-Chair of the IBA Asia Pacific Regional Forum and Managing Partner of Majmudar & Partners, Mumbai. ‘More importantly, companies on average have managed extremely low scores in certain indicative metrics.’

For instance, Hirani says, only a quarter of companies appear to have disclosed their policies for management of pre-consumer waste – particularly disappointing given the worldwide consensus on the need to tackle climate change. ‘Such results point to the fact that either most companies are unwilling to adopt policies on issues where public discourse exists or that public demand for certain practices does not translate into the material choices they make when they purchase products,’ says Hirani. ‘In either scenario, it seems that ethical management of supply chains and improvement of working conditions remains a distant dream.’

Emily Dorotheou, an associate at Mishcon de Reya, says that traceability remains the biggest issue, which reflects the vast and complex supply chains of global brands. Currently, only five per cent of brands disclose details of their raw material manufacturers.

‘There’s limited data for the purchasing practices of brands, how brands prioritise their human and environmental initiatives, and the outcomes of those initiatives,’ says Dorotheou.

The Rana Plaza tragedy highlighted concerns over the supply chains of global brands


Rising public demand for transparency in supply chains helps improve the treatment of workers, says Hirani. However, this is negated by the fact that equity markets reward companies with stellar numbers when they keep production costs low and sell at high margins. ‘The countries that need to improve the most have economies premised on the availability of cheap labour, such as the emerging Asian and African countries,’ says Hirani.

To see marked improvement, there needs to be a change in the thinking of regulators and market participants. For example, companies could be rewarded for ensuring humane worker conditions and pay parity. ‘Measures incentivising companies by offering benefits – such as tax or compliance exemptions – are likely to be the most effective way to increase compliance,’ says Hirani.

Across the world, some progress is evident. California has implemented transparency requirements in respect of corporate supply chains and other US states, as well as Canada, are considering laws requiring companies to disclose policies implemented within supply chains.

India updated its law prohibiting child labour in industry in 2016 – though activists have expressed concern about loopholes in the law. France, meanwhile, has a ‘plan of vigilance’ law, which obliges qualifying companies to identify and prevent human rights and environmental issues. Other examples of efforts to eradicate slavery, says Dorotheou, include Brazil’s public ‘dirty list’ of companies found to be using forced and child labour.

However, country-specific laws to tackle supply chain exploitation typically lack any real sanctions for companies failing to tackle supply chain issues, and require updating. ‘The definition of “child labour” differs across countries, and countries impose different transparency and reporting requirements,’ Dorotheou explains. ‘A harmonised global approach would allow for meaningful comparisons and prevent regulatory arbitrage.’

Fashion brands also appear to be upping the ante. Alyx, for example, recently announced plans to use technology to allow customers reportedly full insight into the brand’s supply chains. While improving transparency is no doubt the first step, says Hirani, this will not automatically alleviate exploitation. ‘Governments and regulators will have to take the initiative to mandate transparency and disclosures,’ he says. ‘Both supplier and consumer states need to work hand-in-hand if we are to see any substantive increase in transparency.’

A legal obligation on brands to publicly disclose their supplier lists and the outcomes of any supplier assessment and remediation processes would assist in increasing transparency, says Dorotheou. Greater controls and legal prohibitions on unauthorised subcontracting would help to prevent workers effectively becoming invisible within supply chains, she says.

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IBA contributes to UN International Labour Organization debate on the future of work


The regulation of future global workplaces is assessed in a major new report that forms the IBA’s contribution to the UN International Labour Organization’s far-reaching initiative on the future of work. It is due to be launched in a showcase session at the IBA Annual Conference in Seoul on 25 September.

The report covers ten legal disciplines, including diversity, immigration and litigation law, with special consideration to the impact of disruptive technologies. It features contributions from a number of committees within the IBA’s Legal Practice Division.

The impact of new technology on the legal frameworks of labour relations and employment contracts are examined, along with the challenges linked to three of the most disruptive technologies: the Internet of Things, robotics and artificial intelligence, including blockchain.

For example, the study considers the prospect of mass unemployment due to automation, or of a reduction in diversity caused by artificial intelligence bias. It also considers the need for jurisdictions to implement new laws – or update existing ones – to ensure the continued prosperity of the global workforce. A series of wide-ranging recommendations are made.

Other subjects examined include:

  • effects of intellectual property in employment;
  • the impact of new forms of work organisation and employment relations on corporate law;
  • the role of criminal law in protecting workers’ rights;
  • outsourcing and supply chains;
  • compliance and investigation;
  • the protection of human rights in the neo-tech workplace; and
  • new forms of taxation.

The IBA’s insights are being fed into the International Labour Organization’s future of work initiative, an in-depth examination of the new forces transforming the world of work. The multi-stage project aims to provide an analytical basis for delivering social justice in the 21st century.

For details of the showcase session to launch the report, go to tinyurl.com/IBA-Future-Work

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Seoul Annual Conference – new speakers confirmed

A number of prominent new speakers have been confirmed for the highly anticipated 2019 Annual Conference, which opens in Seoul on 22 September.

This year’s line-up of ‘A conversation with…’ lunchtime sessions will include interviews with O-Gon Kwon, President of the Assembly of States Parties of the International Criminal Court, who was one of the judges in the trial of Slobodan Miloševic; and North Korean defector and activist Hyeonseo Lee, who helped her family to escape and has spoken out about human rights abuses in the country.

O-Gon Kwon and Hyeonseo Lee

The Chief Justice of Hong Kong’s Court of Final Appeal, Geoffrey Ma Tao-li, will deliver the keynote speech at the Asia Pacific Regional Forum lunch on 24 September. Sangwoo Kim, who leads Samsung Electronics’ global legal affairs team, will be guest speaker at the Corporate Counsel Forum’s breakfast on 25 September. The latter event is exclusively for in-house counsel.

For details of the ‘A conversation with…’ lunchtime sessions, go to tinyurl.com/IBA-conversations

More information on the Asia Pacific Regional Forum lunch can be found at tinyurl.com/asia-pacific-lunch

To register for the exclusive Corporate Counsel Forum breakfast, go to tinyurl.com/CCFBreakfast


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IBA President visits South Africa to discuss regional challenges


The IBA’s President Horacio Bernardes Neto and Executive Director Mark Ellis travelled to South Africa in June, to meet with the Southern Africa Litigation Centre (SALC) and discuss rule of law challenges across the region.

The delegation received an update on SALC’s work to promote human rights, democratic governance and access to justice through strategic litigation and advocacy work. They also participated in a roundtable discussion, met with IBA members from across the region and visited historic sites from the Apartheid era.

Co-founded by the IBA and the Open Society Initiative for Southern Africa in 2005, SALC’s remit covers international criminal justice, freedom of expression, health rights, access to justice, LGBT+ rights and non-discrimination. It works with local strategic partners on a variety of outreach and capacity-building programmes.

Read more at tinyurl.com/iba-salc

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Upcoming webinar on women rainmakers

A panel of women lawyers will discuss their careers and provide advice on business development in the latest webinar from the Law Firm Management Committee.

‘Women Making it Rain: Advice from Great Women Rainmakers, Across the Globe’ will be streamed live on 29 October. The panel of lawyers will outline their routes to success and the techniques they’ve found most effective when growing their practices. The discussion will also cover how firms are training the next generation of lawyers, and give advice for women lawyers who are beginning their careers.

Register for the webinar at tinyurl.com/iba-rainmaker-webinar

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Environmental law in Africa – new book

The role of environmental law in driving Africa’s sustainability agenda is examined in a new book, published by LexisNexis in collaboration with the IBA Environment, Health and Safety Law Committee.

The Environment, Critical Policies and Legal Frameworks: An African Perspective considers legal frameworks and policies across the continent, and how they can propel Africa towards achieving its Agenda 2063 strategic goals for sustainable economic growth and development.

The book aims to promote discussion on how Africa’s environmental legal frameworks can be strengthened. Areas covered include environmental governance; the impact on human rights; the role of extractive industries; and the different dimensions of sustainable development.

For more information and to place an order, go to tinyurl.com/africa-env-law

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America and the world order – new podcast


Former US Ambassador Nikki Haley, who announced the US withdrawal from the UN Human Rights Council in June 2018

The Trump administration’s unique approach to world affairs and its rejection of international institutions is causing lasting damage to the global rules-based order. In a new Global Insight podcast, the top legal advisers to two former US presidents consider the threat to international law and the shared system of global governance.

President Trump has pledged to withdraw the US from the Paris climate change agreement, as well as pulling out of international trade deals and the UN Human Rights Council. Assessing the implications are:

  • John Bellinger, who served as Senior Associate Counsel to President George W Bush and top legal adviser to the US State Department; and
  • Harold Koh, the State Department’s most senior lawyer under President Obama, and Assistant Secretary of State for Democracy, Human Rights and Labor during the Clinton administration.

They assess America’s diminishing global influence; the implications for human rights and the rule of law; the shift in relations with other countries; and the guardrails in place in the US government to keep the President in check.

Listen to the podcast at tinyurl.com/america-world-order

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IBA and World Bank highlight the economic benefits of legal aid

The IBA Access to Justice and Legal Aid Committee is partnering with the World Bank on a new global study of the economic benefits of legal aid.

A project report – including a cost-benefit analysis tool for calculating the benefits in jurisdictions – will be launched in a showcase session at the Annual Conference on 26 September.

As part of the year-long project, economists and statisticians have analysed material, including that provided by IBA members, to show how legal aid not only benefits individuals and societies, but also saves government expenditure in other areas.

There is concern that many governments refer to legal aid as an economic drain on public finances. But the reality is that the savings made by avoiding homelessness, family breakdown and unemployment greatly outweigh the cost of providing legal aid to allow people to assert their rights.

The cost-benefit analysis tool will enable the economic benefits of legal aid to be calculated in a wide variety of situations, ranging from whole legal aid systems to small-scale studies looking at the benefits arising from the availability of legal aid in specific scenarios and locations.

More information on the showcase session to launch the report is available at tinyurl.com/IBAAccessToJustice

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Blockchain: technology making in-roads but yet to transform legal sector

POLLY BOTSFORD

In April, international law firm White & Case announced it was piloting a project using blockchain to stream-line document-heavy environmental, sustainability and governance (ESG) procurement questionnaires, a form of due diligence report for potential investors. The scheme is one of a number in legal services that utilise blockchain technology – the use of a block-by-block distributed ledger to store assets – to save time and money.

One of China’s dedicated internet courts, which is based in Hangzhou and solely hears internet-related disputes, now permits the use of blockchain technology as a means of providing evidence. The change in policy follows a copyright dispute that involved an alleged copyright infringement of certain webpages. The injured party was able to log the infringement on a blockchain, which was deemed legally admissible.

The Chinese Supreme Court also confirmed in September 2018 that blockchain can be used to verify electronic evidence submitted to courts.

While blockchain is being utilised in legal services – as in other sectors – its use so far seems discrete, rather than the fundamental shift some experts predicted in the legal sector. ‘Though one can see how intellectual property infringement cases [as in the Hangzhou case], for instance, can benefit from a system that allows you to verify a document in place and time, blockchain is emerging but it is not going to fundamentally change the way lawyers deliver their services,’ says Joost Linnemann, Vice-Chair of the IBA Technology Law Committee and CEO of Amsterdam firm Kennedy Van der Laan.

Cryptocurrencies, which are enabled by blockchain, have notably fluctuated in value. This has perhaps hindered the adoption of blockchain itself. Bitcoin, the most familiar digital currency, descended from a value of $19,783 in December 2017 to $3,122 in December 2018.

David Fisher, founder and CEO of Integra Ledger, a blockchain-based tech company for legal services, is not that surprised. ‘We went from a frenzy of misinformation and hype in 2017, then through the trough of disillusionment and the collapse of many initial coin offering (ICO) blockchain projects,’ he says. ‘But this is a typical tech adoption timeline: the more ridiculous projects get washed out, and what remains is the substance.’

Lee Bacon, insurance partner at Clyde & Co and co-founder of the firm’s smart contracts consultancy, Clyde Code, agrees. ‘We’re at the “get real” stage,’ he says.


Clyde & Co has launched a ‘connected contract’ for insurer clients that, in effect, automates the performance of an insurance policy by receiving and crunching data and outputting possible losses and claims. ‘I would say we’re still working on “blockchain-light” schemes: these are relatively contained pilots dealing with specific issues,’ says Bacon.

These projects are built as private blockchains rather than public ones. However, typically it has been products built on the latter that have attracted interest: the cryptocurrency Bitcoin, built on a public blockchain, is the best-known example.

Neil Brown is a telecoms and internet lawyer with his own firm, decoded.legal. ‘Public ledgers are exciting and different, and could be useful for something like a land registry but most blockchain development appears to be private, and I struggle to see how it is that different from a secure database,’ he says.

Brown’s own firm has adopted a blockchain for its billing and timekeeping procedures, but he remains sceptical. ‘The fact that someone is using a blockchain for something doesn’t mean that blockchain was necessarily the best way of solving whatever the identified problem was,’ he says. ‘There is, without doubt, some marketing value in saying that a project involves a blockchain.’

The implications of blockchain for lawyers include, as with any new technology, new business. Linnemann says blockchain has created a ‘modest level of work’ for law firms as clients launch projects in a range of sectors, such as shipping or real estate.

Fisher predicts more will follow for legal services, and as early as 2020. ‘Blockchain has not had a significant impact – yet,’ he says. ‘At the moment we are seeing an increase in understanding and a reduction in hype. Blockchain may not be transformational but it will be ubiquitous.’

The legal tech sector is adopting blockchain technology in similar ways to law firms. NetDocuments has integrated blockchain features into its document management systems. ServeManager has piloted a scheme whereby blockchain will create a distinct and verifiable record each time documents are served on someone.

Perhaps, despite the slow start, the ‘second generation of the internet’ – as blockchain has also been labelled – is still a likely outcome. In 2017, two Harvard Business School professors, Marco Iansiti and Karim R Lakhani, published a paper in the Harvard Business Review in which they argued for a distinction between ‘disruptive’ technologies and ‘foundational’ technologies. According to Iansiti and Lakhani, blockchain is a foundational technology, just as the internet itself was also a foundational technology.

The professors ultimately make the case that foundational technology takes longer to embed itself because it changes ‘the foundations for our economic and social systems... it will take decades to seep into our economic and social infrastructure.’

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