This article is published in CSR Asia Weekly, Vol.3, Week 33, 15-8-2007


Stephen Frost

Suing stakeholders: solution or setback?

Two prominent European non-government organisations (NGOs) are being sued by an Indian garment company for cyber crime. In what appears to be an unprecedented legal move, Fibres & Fabrics International (FFI) and its subsidiary Jeans Knit Pvt. Ltd. (JKPL) in Bangalore have accused Dutch-based Clean Clothes Campaign (CCC) and the India Committee of the Netherlands (ICN) of “cyber crime, acts of racist and xenophobic nature and criminal defamation.”

CCC is a well known international NGO, focusing on improving working conditions in the garment and sportswear industries, and empowering the workers in it. It consists of an international network of trade unions and NGOs. The ICN is an independent NGO, based on solidarity with deprived groups in Indian society (including workers). Both groups are concerned with issues relating to corporate accountability and CSR more generally.
According to a press release earlier this year, the CCC and the ICN were summoned to appear in a Bangalore court on 25 June 2007. This is the first time that a factory has filed suit against the CCC and the ICN for publishing information on working conditions in the garment industry on their respective websites. The information was based on interviews with workers from the factories conducted in November 2005 and March 2006. Both groups maintain that the interviews revealed serious labour rights’ violations. The two groups also contend that these claims were backed up by a fact-finding mission in 2006.

In autumn 2005, the CCC and ICN received information alleging serious labour rights violations in the garment producing facilities of FFI/JKPL) in Bangalore, India. The information originated with l the Garment and Textile Workers Union (GATWU), the New Trade Union Initiative (NTUI), the Civil Initiative for Peace and Development (CIVIDEP), the Women Garment Workers Front Munnade and the CCC Task Force Tamil Nadu. These organisations provided the Dutch groups with reports of workers’ interviews describing “high workloads, forced overwork, physical and psychological abuse, non-payment of overtime, and the non-issuance of identity cards and contracts”. The claims were confirmed by an independent fact-finding committee consisting of local human rights organisations and social activists.
In the summer of 2006, the CCC and ICN started a public campaign to support local organisations in their efforts to improve labour conditions at FFI/JKPL. According to CCC, all parties involved felt that FFI/ JKPL needed to engage in a meaningful dialogue with local labour organisations so that alleged labour rights violations could be resolved. CCC and ICN both believe that they have strongly campaigned for FFI/ JKPL to start a meaningful dialogue with the trade unions GATWU/ NTUI and the labour support organisations Munnade and CIVIDEP to solve the outstanding issues.
In June 2006, FFI/JKPL petitioned and received a gag order to prevent labour organisations and trade unions from speaking out about labour violations in the company’s factories. The organisations named in the order included Munnade, CIVIDEP and the trade unions GATWU and NTUI. The court issued a temporary restraining order on 28 July 2006, which was prolonged in February 2007. This order effectively silenced local stakeholders from speaking out about what they believed was the real labour situation and providing support to workers in improving the labour conditions at FFI/JKPL.
At the same time, a fact finding mission (formed by local legal, academic and human rights practitioners) interviewed workers and met with management. The subsequent report (dated 24 August 2006), was published on the CCC website (cleanclothes.org). In the report were the following allegations:
• Beating occurs for even minor faults in work and when workers cannot meet production targets that are unreasonably high.
• Supervisors are themselves beaten.
• In October 2005, a boy was stripped and beaten in front of all the workers in the shift.
• Musclemen are paid to beat up the workers outside the factory.
The report concluded: “our hope is that the management of FFI initiates steps towards creating a free and fair work atmosphere for the workers and also that the palpable sense of suspicion towards the workers is replaced by a genuine recognition of their legal and labour as well as human rights.”
CCC admitted that since an initial report by the fact finding mission the company has dealt with a number of serious violations, including physical abuse and non-payment of overtime. But it still maintains that systematic changes are still needed. The major problem, as perceived by the CCC is that the company started “intimidating local organisations by threatening some of their staff, watching their meetings, following their members and taking legal action against them”.
Following efforts to draw attention to the labour rights violations at FFI/JKPL, the CCC and the ICN and seven of their staff members were summoned to appear in court in Bangalore on 25 June 2007. The Dutch organisations are accused of “cyber crime”, “acts of racist and xenophobic nature” and “criminal defamation”. Others accused of defamation and summoned to appear in court in June are Internet providers Antenna and Xs4all.
The court case has now been postponed until 31 August 2007. CCC and ICN say they will contest the case in the High Court, both procedurally as well as on contents.

Current actions
CCC and ICN have urged companies sourcing from FFI/JKPL to take collective action to address the alleged workplace violations. Brands sourcing from the company include Guess, RaRe, Armani, Mexx, Gap, Ann Taylor, and G-Star. According to CCC, brand name companies represented by the Fair Wear Foundation (Mexx), the Ethical Trading Initiative (Gap) as well as G-Star agreed to operate collectively in addressing FFI/JKPL. Social Accountability International (SAI) was also part of this endeavour.
With regard to SAI, since four of five FFI/JKPL production facilities had been accredited as SA8000 certified (by December 2006). In November 2006, the CCC and ICN filed a formal complaint with SAI, challenging the ongoing certification process of the FFI/JKPL production units. The CCC and ICN expressed fundamental doubts regarding the quality and reliability of the certification process: with the restraining order in place no meaningful consultation of the directly concerned local stakeholders could have taken place, which is a prerequisite of the SA8000 procedures.
At the end of February 2007, SAI reported to the CCC and ICN that they hired a consultant to examine the certification process, including the role of the three certification bodies and the quality of the stakeholder consultation. The consultant allegedly met several times with FFI/JKPL management to urge them to normalise labour relations, withdraw the legal proceedings against the local labour support organisations and start meeting with them to follow up on the outstanding labour issues. On the basis of this evaluation, SAI has formally informed FFI/JKPL in writing that it would advise its certification bodies to suspend the certification of FFI/JKPL facilities unless FFI/JKPL would engage with the local labour organisations in order to realise normalisation of the strained labour relations. This should also include taking steps towards the lifting of the restraining order. On April 30, 2007, SAI posted a public statement on its website, which declares legal proceedings against local stakeholders to be fundamentally incompatible with SA8000 certification of companies.
CCC has initiated an email campaign on its website, targeting the brands and FFI/JKPL. The letter to FFI includes the following: “I have been informed by the Clean Clothes Campaign (CCC) and the India Committee of the Netherlands (ICN) about the history of violations of workers' rights in your factory and the legal proceedings you have initiated against labour rights organisations both locally and internationally.
Despite repeated calls by the trade union GATWU for dialogue, you asked for a court order to be placed on local Indian organisations to prevent them from circulating information related to the labour rights situation in FFI and JKPL inside and outside India. Nationally and internationally this gag order is seen as a very restrictive step that seriously hampers workers and their organisations from speaking out and defending their rights.
Equally alarming is the fact that you have pursued legal action against other organisations and their employees for urging you to resolve the outstanding labour issues, most notably the lack of freedom of association of your employees. Recently you have started litigation against the CCC and the ICN, accusing them of slander following their efforts to draw attention to the reported workers´ rights violations at your facilities.”
The emails to the brands includes requests they “immediately call upon FFI/JKPL to resolve the outstanding labour issues” and “to call upon FFI/JKPL to immediately embark upon a process of mediated dialogue with the local trade union GATWU and other local labour rights organisations including NTUI, Cividep and Munnade”. According to the CCC website, “in February 2007 a major global brand [told CCC it] was considering placing orders at FFI/JKPL. However, it acknowledged that the current actions of FFI/JKPL management, including the legal actions against labour rights organisations and the refusal to start a dialogue to resolve outstanding labour issues, were unacceptable. Unfortunately, its subsequent efforts to resolve these issues with FFI/JKPL were not successful. Therefore this brand continues to refrain from placing orders with FFI/JKPL.”

Suing stakeholders
When McDonald’s sued Helen Steel and Dave Morris in 1994 for distributing leaflets implying the company destroyed rainforests, promoted unhealthy food and exploited women and members of ethnic minorities to obtain cheap labour, it believed the case would last several months and that the cost (although great) would be “worth it”. In 2005, Steel and Morris, who lost the first court case but won their claim that the libel trial was unfair, demonstrated that suing stakeholders is not always the best option. And it certainly wasn’t worth it for McDonalds.
Has FFI/JKPL embarked on a similarly ill considered legal path? It is too early to say, but several things are apparent even at this stage.
First, CCC and ICN have won the case in the court of public opinion. In this court, the truth is not at issue. At issue is whether people believe the company is acting in good faith. The NGOs clearly have the ability to spread the word, harness the collective power of numerous other NGOs globally via the Internet and a longstanding and well linked network of civil society organisations, and challenge the company’s view of events with reports based on interviews and local groups. FFI/JKPL has confused winning in court with “winning in the court of public opinion”. The two are not the same.
Second, whether business owners like it or not, stakeholders can now talk back in ways never before imagined. The longer the case drags on, and the more bloggers hear about it, the more likely it is to be picked up by the mainstream media as an interesting story. The old news cycle is defunct. Stories now spread virally on blogs, bulletin boards and other Internet media. Stories that a decade ago would never have been reported outside of the local press may today be spread more widely and for reasons that not entirely clear to anybody. The definition of newsworthiness has altered, and citizen journalists and the new media now make it likely that FFI/JKPL will become famous, but for all the wrong reasons in some people’s eyes.
Third, FFI/JKPL has managed its relations with stakeholders in a clumsy manner. Its emotional response has placed business at risk. Donald Trump is not usually associated with great CSR practices, but a line made famous by his popular TV show The Apprentice is worth repeating: “It’s nothing personal ... it’s just business”. Losing business on the back of “being right” is short sighted. If CCC is correct and at least one brand has reconsidered doing business with FFI/JKPL, then “being right” is costing money.
Engaging with stakeholders is not war (although sometimes it might feel like it). Taking legal action is guaranteed to escalate what is in effect a routine act in the apparel sector these days: criticising factories is commonplace and is not going to disappear. Managing stakeholder expectations, building relations and acting fairly is possible.
Someone at FFI/JKPL should pick up the phone and call me.

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