1. Governance by contract? The dimensions of the legalization of labour standards in World Bank private sector development finance Conor Cradden & Jean-Christophe Graz

2. Supply chain codes of conduct, investment conditionality, multistakeholder certification & labelling schemes – same basic aim and legal structure Private regulation uses market leverage to help enforce international labour standards at firm level: rather than labour law, enforcement is via private contract Evidence of modest gains in pay, hours of work, OHS, but little if any direct impact on FoA & CB rights But, evidence (1) mostly based on small n case studies; and (2) takes insufficient account of the way in which private regulation is or might be used by local actors

3. The IFC’s ‘performance standards’ system PS system is IFC’s firm-level social & environmental conditionality system, introduced in 2006. Applies in the same form across multiple states and industry sectors IFC client businesses required to comply with the standards as a contractual condition of investment One standard is about labour and working conditions; includes provisions on workers’ organizations drawn from international law on FoA & CB rights, notably ILO core conventions

4. “where national law is silent, the client will not discourage workers from electing worker representatives, forming or joining workers’ organizations of their choosing, or from bargaining collectively, and will not discriminate or retaliate against workers who participate, or seek to participate, in such organizations and collective bargaining. The client will engage with such workers’ representatives and workers’ organizations, and provide them with information needed for meaningful negotiation in a timely manner”

5. Reasons for optimism Language of PS is precise and appears to establish that actively resisting independent worker organization and collective action is not acceptable under any circumstances. IFC remains in close contact with clients. E&S staff visit businesses at least every two years & usually more frequently. 3 rd party compliance monitoring also carried out in highest risk cases. Compliance obligations written into investment contract. IFC has the right to delay disbursement of funds or to withdraw from the investment in the case of non- compliance

6. Disappointing reality Conformity with PS2: 71 workers (24%) working in 22 businesses (40%) report some kind of FoA violation Internal change – direct effects: 70% of IFC ‘mitigation measures’ concern only contents of written HR policy or establishment of grievance procedures Internal change – indirect effects: Very low awareness that performance standards exist (6% workers, 30% union reps); equal numbers of workers report +ve change as -ve

7. The dimensions of legalization

8. The degree to which actors “are legally bound by a rule or commitment in the sense that their behavior thereunder is subject to scrutiny under the general rules, procedures, and discourse of international law, and often of domestic law as well” Obligation

9. IFC Client business IFC Workers Employment relationship Commercial contract

10. “we have to say up front that [getting to what would be normally be an acceptable level of compliance] isn’t going to work and then we decide: do we recognise it and say we’ll take the risk, or at least be transparent that this won’t meet the requirement but that hopefully we’re pushing the envelope in other aspects of our engagement” (Senior IFC E&S staff member)

11. Precision The degree to which “rules unambiguously describe the conduct they require, authorize, or proscribe” Precision

12. Application of FoA & CB rights in practice Core conventions (87 & 98) Jurisprudential acquis of ILO supervisory system ILO as external point of reference for private compliance initatives

13. Delegation The degree to which “third parties have been granted authority to implement, interpret, and apply the rules; to resolve disputes; and (possibly) to make further rules.” Delegation

14. E&S Staff Independence IOs decide on sanctions Some 3 rd party monitoring Monitors only report findings Internal oversight office (CAO) exists Does not rule on the substance of complaints

15. IFC Client business IFC Workers Employment relationship Commercial contract

16. Spaces for power Obligation Precise compliance obligations depend on negotiation between IFC and client, hence obligation is not legal but a question of power and interests. Workers excluded from that negotiation, although limited consultation undertaken in some cases Precision Missing international institutional context means that FoA & CB rights are whatever regulators say they are. Workers can influence that definition in individual cases, but IFC privileging of national law means that PS system adds little to the picture Delegation Enforcement of PS regulation is almost entirely non-delegated. Complaints of violations are more likely to be entertained if workers have some leverage over IFC via political and campaigning action