978-0132718974 Chapter 8 Solution Manual Part 1

Unlock access to all the studying documents.

View Full Document

Services and Labor

I. Text Materials

Introduction

The rules on services are now found principally in the General Agreement on Trade in Services

and in the agreements creating certain regional economic organizations such as the EU and the

North American Free Trade Area.

The rules governing labor are to be found in the international labor standards promulgated by the

International Labor Organization, in the agreements creating some regional organizations, and in

national legislation.

General Agreement on Trade in Services

The purpose of General Agreement on Trade in Services (GATS), which came into effect on

January 1, 1995, is to give international trade in services a set of rules and principles and a basis

for liberalization similar to those that GATT has applied to goods for the past five decades.

GATS is made up of three interrelated components:

the agreement itself (often called the Framework Agreement), which contains the rules

applicable to all member states of the World Trade Organization (which are automatically

parties to the GATS);

the sectoral annexes that deal with issues unique to particular economic sectors (i.e.,

movement of natural persons, air transport services, financial services, maritime transport

services, and telecommunications); and

the national Schedules of Specific Commitments each member state has agreed to undertake,

which were agreed to mainly through negotiations undertaken as part of the Uruguay Round

of Multilateral Trade Negotiations that produced the WTO Agreement and the agreements

made by nations when joining the WTO later through accession.

The Framework Agreement – Although much of GATS is based on the provisions in GATT and

uses much of the same terminology, the “architecture” of GATS is significantly different. GATS

contains two sets of obligations: (1) a set of general principles and rules that apply to all measures

affecting trade in services and (2) a set of principles and rules that apply only to the specific

sectors and subsectors that are listed in a member state’s schedule. The consequence of this

division of obligations is that the principles and rules in GATS are less binding than those in

GATT.

Scope and Definition

Services and Labor

The Framework Agreement covers all trade in services in any sector except those supplied in the

exercise of governmental functions. However, the agreement does not define either service or

service sector. In common usage, a service is an act or an action, such as work rendered or

performed for another, and service sectors are any parts of the economy related to the

performance of such work.

The GATS rules apply neither to laborers, nor to member states’ laws governing the permanent

employment of natural persons. GATS governs neither trade in goods (which is covered by

GATT) nor the trade-related aspects of intellectual property rights (which are covered by TRIPS).

The Framework Agreement defines trade in services in terms of modes of supply. Four modes are

described:

the cross-border supply of services that do not require the physical movement of either the

supplier or the consumer (such as telecommunications),

the supply of services that require the consumer to go to the supplier (such as tourism),

services supplied by a service supplier from one member state by means of a commercial

presence in another member’s territory (such as banking), and

services supplied in the territory of a member state by a service supplier from another

member state by means of the temporary presence of natural persons of another member state

(such as construction or consulting work).

Case 8-1: European Communities—Regime for the Importation, Sale, and Distribution of

Bananas

Facts: The EC appealed from the holding of a Panel that its regime for the importation of bananas

was in violation of the GATT and the GATS.

Issues: (1) Does the GATS apply to the EC’s import licensing procedures? (2) Are the GATT and

GATS mutually exclusive? (3) Are operators engaged in the wholesale distribution of bananas

service suppliers? (4) Are operators in an integrated company to be treated as service suppliers?

Holdings: (1) Yes. (2) No. (3) Yes. (4) Yes.

Law / Explanation: (1) GATS Article I:1 states that GATS “applies to measures affecting trade in

(2) GATT and GATS are not mutually exclusive. The focus in GATT is on how a measure affects

the goods involved. The focus in GATS is on how a measure affects the supply of a service or the

(3) The operators described in the EC regulations are engaged (at least in part) in the wholesale

Order: The EC is to bring its banana regime into compliance with the GATT and the GATS.

Services and Labor

General Obligations and Disciplines

Two general obligations in the Framework Agreement apply to all WTO member states: (1)

most-favored-nation treatment and (2) transparency. The most-favored-nation (MFN) treatment

provision provides that “each member shall accord immediately and unconditionally to services

and service suppliers of any other member treatment no less favorable than that it accords to like

services and service suppliers of any other country.”

The MFN treatment rule in the Framework Agreement is not a binding requirement that must be

uniformly observed. During the Uruguay Round negotiations, the representatives of service

industries in a number of industrialized nations argued that unconditional MFN treatment would

allow states with restrictive laws governing services to keep those laws in place while their own

service suppliers would get a “free ride” into the markets of states with more open laws. To force

states with closed markets to open them, the service industry representatives successfully

advocated the use of MFN exemptions.

An annex was added to GATS that (1) allowed the original WTO member states to submit a list of

MFN exemptions that became effective when GATS came into force and (2) provided that any

later applications for exemptions will be considered using the ordinary WTO waiver procedures.

The MFN exemptions are to be limited in time (lasting no longer than 10 years) and subject to

periodic review and to negotiation in future trade liberalization rounds.

The transparency provision in GATS requires member states to publish, prior to their entry into

force, all of their national measures and international agreements that affect their obligations

under GATS. Additionally, they have to notify the Council for Trade in Services of any relevant

changes to those measures and agreements at least annually, and they are obliged to respond

promptly to another member state’s requests for information and to establish points of inquiry to

facilitate this.

The Framework Agreement also establishes other general criteria governing trade in services,

most of which are analogous to similar provisions in GATT. GATS seeks to encourage regional

economic integration both in trade in services and in the movement of labor. GATS requires its

member states to ensure that their domestic regulations affecting trade in services are

administered in a reasonable, objective, and impartial manner.

No restrictions may be applied by member states to international transfers and payments for

current transactions. Nevertheless, restrictions may be adopted or maintained if a member state

suffers serious balance-of-payments difficulties, especially if the member is developing or is in

transition to a market economy.

When restrictions are imposed, they must not discriminate among member states or unnecessarily

damage another member’s economic interests; they must conform to the Articles of Agreement of

the International Monetary Fund; they may not be excessive; and they must be temporary and

progressively phased out as their purpose is achieved.

Other obligations and disciplines were being considered for inclusion in the Framework

Agreement during the Uruguay Round but were not included. The negotiating parties,

nevertheless, agreed to continue multilateral negotiations on these items. Negotiations to devise

rules on emergency safeguard measures, government procurement of services, and

trade-distorting subsidies are still ongoing.

Services and Labor

At the Doha Ministerial Conference, the services negotiations became part of the “single

undertaking” under the Doha Development Agenda. At that time it was agreed by all that

negotiations regarding safeguards, government procurement, and subsidies would be conducted

along with the other Doha topics. Yet as of summer 2012, no firm agreements had been reached.

The Council for Trade in Services is the body responsible for overseeing the negotiations.

In April 2011, the Chairman of the Council for Trade in Services submitted a report to the Trade

Negotiations Committee called “State of Play” regarding the achievements and remaining gaps in

all four areas of the services negotiations: market access; domestic regulation; GATS rules; and

the implementation of LDC modalities.

Negotiations to agree on rules concerning the links between the services trade and the

environment began in January 1995, and they are still ongoing as part of the Doha Round

negotiations. The Framework Agreement provides for general exceptions and security exceptions

that are analogous to those found in GATT.

Specific Commitments

Following negotiations, or on its own initiative, a member is to submit a Schedule of Specific

Commitments for annexation to GATS that lists the sectors (or subsectors) it is opening to market

access. The member may also list limitations that apply to these sectors.

For the sectors listed in a member state’s Schedule of Specific Commitments, the member must

observe two specific obligations: market access and national treatment. Market access is defined

as giving services and service suppliers of other members “treatment no less favorable” than that

listed in the member’s schedule. National treatment is giving services and service suppliers of

other members “treatment no less favorable” than what the member grants its own like services

and service suppliers.

Progressive Liberalization

The long-term objective of GATS is to encourage its member states to open as many of their

service SECTORS to market access as possible. Although progressive liberalization is the goal of

GATS, member states are not permanently bound to the commitments they make in their

Schedules of Specific Commitments. After a period of three years from the entry into force of a

commitment, a member may modify or withdraw it.

Institutional Structure

The operation of GATS is overseen by a Council for Trade in Services made up of representatives

of all WTO member states. Subordinate to the council are several bodies, including sectoral

committees responsible for the operation of the different sectoral annexes.

The Council for Trade in Services is the WTO Secretariat that provides technical assistance to

developing countries on matters related to trade in services. Both consultations and dispute

settlements related to GATS are governed by the WTO’s Understanding on Rules and Procedures

Governing the Settlement of Disputes.

GATS Annexes – The annexes deal with special aspects of particular service sectors or issues.

Services and Labor

GATS Schedules of Specific Commitments – Each WTO member state is required to submit for

annexation to GATS a Schedule of Specific Commitments regarding the service sectors that it has

opened to international market access. For each such sector, its schedule must specify:

terms, limitations, and conditions on market access,

conditions and qualifications on national treatment,

undertakings relating to additional commitments,

the time frame for implementing its commitments (if that applies), and

the date of entry into force of its commitments.

Members are not required to open all of their service sectors, and developing countries have

opened only about one-fifth of their service sectors and developed countries about two-thirds of

theirs. The Framework Agreement requires that negotiations continue to liberalize the

international trade in services.

Regional Intergovernmental Regulations on Trade in Services

EU Law on Trade in Services – The EU is a common market not only for goods but also for

services and labor. The Treaty Establishing the European Community (EC Treaty), and the Lisbon

Treaty of 2010 are the principal source of law in the EU, and create a much more open and liberal

market for services between and among its member states.

The freedom to provide services relates to economic activities carried out on a temporary or

nonpermanent basis. The right of establishment authorizes a natural person or a company to settle

permanently in a member state and carry on a business. It includes the right to set up and carry on

a business both as an individual and as an employer.

In several cases, the European Court of Justice has read the two provisions together and hinted

that it regards them as part of a general right of a self-employed person to pursue activities

throughout the EU regardless of the location of his principal office or the kind of economic

endeavor in which he is involved.

To ensure that the right of establishment and the freedom to provide services are meaningful

guarantees, the EC Treaty declares that the self-employed and the employees of service suppliers

are entitled to travel freely within the member states of the EU and to carry on their activities free

from discrimination.

Each nation still maintains a large body of its own labor and employments laws and regulations,

which are legal and enforceable as long as they do not discriminate against foreign workers. The

EU laws allowing freedom of movement for workers are not absolute rights, however. Entry can

be limited on the grounds of public policy, public security, and public health, and contracts with

the public service can be limited to nationals of the member state.

Provisions Governing Trade in Services in the North American Free Trade Agreement

(NAFTA) – The trade-in-services provisions in NAFTA are very similar to those found in GATS.

One important difference between GATS and NAFTA is that NAFTA does not deal with services

generally, but rather by sectors. Its main service provisions are in three core service chapters

(cross-border trade in services, telecommunications, and financial services), two associated

Services and Labor

chapters (investment and temporary entry of businesspeople), and three annexes (land

transportation, professional services, and specific reservations and exceptions).

Another difference is that NAFTA does not specifically define the four basic modes of supply,

and instead deals with them piecemeal. NAFTA’s chapter on cross-border trade in services covers

that mode.

A third difference between NAFTA and GATS is the manner in which NAFTA deals with sectoral

coverage. NAFTA requires its countries to specify the sectors that are not covered by the

agreement (a negative list) and the limitations that apply to them (a negative list).

Finally, the NAFTA countries may modify their lists of sectors and limitations. However, they

may not, unlike GATS member states, make the lists more restrictive.

International Labor Law

International law has been concerned with the rights of laborers from the beginning of the

twentieth century. Following World War I, the international community agreed to establish the

International Labor Organization (ILO). With the creation of the United Nations after World War

II, the right of laborers to have reasonable working conditions became part of the basic human

rights that were incorporated in the UN’s Universal Declaration of Human Rights.

International Labor Organization – The International Labor Organization (ILO) has as its

primary goal the improvement of working conditions, living standards, and the fair and equitable

treatment of workers in all countries.

Created in 1919 by the Treaty of Versailles, it became a specialized agency of the United Nations

in 1946. Headquartered in Geneva, the ILO carries out its objectives by issuing recommended

labor standards, organizing conferences to draft international labor conventions, monitoring

compliance with its recommendations and conventions, and providing technical assistance to

member states.

The ILO’s institutional structure is made up of a General Conference that acts as a legislative

body, approving conventions and adopting recommendations; a Governing Body that serves as

the executive; and an International Labor Office headed by a Director–General that functions as

the organization’s secretariat. The membership of the General Conference comprises

representatives from government, labor, and management.

The Governing Body is composed of 56 members, half of whom are appointed by governments, a

quarter by workers’ groups, and a quarter by employers’ organizations. Of the 28 seats reserved

for government representatives, 10 are further reserved for delegates from the world’s principal

industrial powers.

International Labor Standards

To pursue its goal of improving the lot of all working people, the ILO attempts to establish rules

or standards that have international effect. Two instruments are used to create international

standards: ILO conventions and ILO recommendations. Conventions are sponsored by the ILO

when there is substantial agreement in the international community about a particular labor

Services and Labor

practice. Recommendations are issued by the International Labor Office staff when the situation

is more amorphous.

ILO conventions and recommendations have dealt principally with three concerns. First, they

have focused on the basic issues of labor protection, such as employment conditions and the

protection of women and children. Second, they have concentrated on setting up the basic

machinery and institutions that are needed to make labor protection effective. Third, they have

worked to promote and protect the human rights and fundamental freedoms of workers.

ILO Reports

The member states of the ILO are obliged to provide annual reports to verify compliance with the

conventions they have ratified, as well as irregular reports (when solicited by the director–general)

to provide information on both recommendations and unratified conventions.

A summary of the information contained in the member states’ reports is prepared annually by the

International Labor Office for use by the General Conference. Since 1927, this has been the job of

the Committee of Experts on the Application of Conventions and Recommendations. It analyzes

and evaluates the submissions, indicating, in the case of unratified treaties and ILO

recommendations, how close international practice is to the standards set by the organization;

and, in the case of ILO conventions, the extent to which the parties have complied with their

obligations.

A special Conference Committee on the Application of Conventions and Recommendations

reviews the summary at the General Conference. This Conference Committee, after hearing

comments from governments, employers, and workers, compiles a special list of the governments

that have defaulted on their obligations to the ILO. Each year the Conference Committee’s special

list is presented to the General Conference for review and adoption.

Settlement of Disputes Between ILO Member States

If an ILO member state violates the ILO Constitution, an ILO convention that it has ratified, or

the ILO Convention on the Freedom of Association (whether it is a party to it or not), there are

several dispute-resolution procedures that can be invoked to reach a settlement.

The Commission of Inquiry: Article 26(1) of the ILO Constitution authorizes any member state to

file a complaint with the ILO “if it is not satisfied that any other member is securing the effective

observance of any convention which both have ratified.” The first Commission of Inquiry was

appointed only in 1961, and only a few other commissions have been appointed since.

The Fact-Finding and Conciliation Commission on Freedom of Association: The Preamble of the

ILO Constitution establishes the “recognition of the principle of freedom of association” as one of

the organization’s primary purposes. To implement this principle, the General Conference

adopted two labor conventions:

the Convention Concerning Freedom of Association (ILO Convention No. 87), which grants

workers the right to form and join trade unions free from governmental interference and

the Convention Concerning the Application of the Principles of the Right to Organize and to

Bargain Collectively (ILO Convention No. 98), which protects workers from antiunion

discrimination and protects unions from employer domination.

Services and Labor

Together with the UN Economic and Social Council (ECOSOC), the Governing Body established

in 1950 a nine-member Fact-Finding and Conciliation Commission to consider complaints

involving violations of the two freedom of association conventions. Under the guidelines

established for the commission, it can hear complaints against a state that has ratified either of the

conventions and, if the state against which a complaint has been made gives its consent, the

commission can consider a complaint even though the state has not ratified either. Few states

have consented to investigations by the Fact-Finding and Conciliation Commission.

The International Labor Office: The ILO Constitution provides that “any questions or dispute

relating to the interpretation… of any convention… shall be referred for decision to the

International Court of Justice.”

Only one case has ever been considered by the ICJ. As a practical matter, reference to the ICJ is

cumbersome and expensive, so governments in doubt about the meaning of an ILO convention

have taken to the practice of asking for the International Labor Office to express an opinion.

Settlement of Disputes Between Intergovernmental Organizations and Their Employee

The Administrative Tribunal of the ILO is a special court that hears complaints from employees

in the secretariats of the ILO and 59 other intergovernmental organizations (IGOs) that have

recognized the competence of the tribunal. The tribunal’s jurisdiction extends to disputes

involving the “nonobservance, in substance or in form, of the terms of appointment of officials”

and to violations of the Staff Regulations of the ILO or other IGOs.

The Tribunal is composed of seven judges, all of different nationalities, who are appointed for a

renewable period of three years. The power of the tribunal to issue judgments, however, is

limited. It has the power to “order the rescinding of the decision impugned or the performance of

the obligation relied upon.” It does not have the power to order an IGO to undertake an action it

has not begun on its own.

Case 8-2: DUBERG v. UNESCO

Facts: Peter Duberg, a U.S. citizen and employee of UNESCO, refused to complete a U.S.

loyalty questionnaire or to appear before a Board at the U.S. Embassy in Paris. UNESCO’s

Director-General (DG) refused to renew Duberg’s employment contract, citing Duberg’s failure to

appear before the U.S. Loyalty Board as the reason for doing so. Duberg appealed to UNESCO’s

Appeals Board, which recommended that he be rehired, but the Director-General refused to so.

Duberg then appealed to the ILO’s Administrative Tribunal.

Issues: (1) Had the DG acted properly in refusing to rehire Duberg? (2) What remedies can the

Tribunal award?

Holdings: (1) No. (2) Equitable remedies.

Law: (1) The DG is to act independently of the interests of “any government or from any

Explanation: The DG acted wrongly by being influenced by the United States government. His

Services and Labor

Order: The DG abused his authority to the prejudice of Duberg. If the DG will not rehire Duberg,

then UNESCO must pay him a monetary settlement for injuries suffered.

The Human Rights of Workers – The basic principles underlying contemporary international

labor law are found in the Universal Declaration of Human Rights and in the International

Covenant on Economic, Social and Cultural Rights. Both the declaration, adopted by the United

Nations General Assembly in 1948, and the covenant, adopted by the General Assembly in 1966

and in force from 1976, reflect the international community’s aspiration and sensibilities

following World War II.

The Preamble to the United Nations Charter declares that human rights are one of the four

founding purposes of the United Nations. Article 1 declares that member states agree to work

together “in promoting and encouraging respect for human rights.” Article 55 states that the

United Nations will promote “universal respect for, and observance of, human rights and

fundamental freedoms,” and Article 56 says that the members “pledge themselves to take joint

and separate action” to achieve that respect.

The United Nations’ Economic and Social Council established a Commission on Human Rights.

Among the commission’s first acts was the creation of a subcommittee to draft an International

Bill of Rights. At the suggestion of Eleanor Roosevelt, the subcommittee began working on a

declaration—the Universal Declaration of Human Rights—to be issued by the UN General

Assembly, as well as two treaties, one dealing with civil and political rights, the other the

International Covenant on Economic, Social, and Cultural Rights.

The Universal Declaration of Human Rights

The Universal Declaration of Human Rights (UDHR) proclaims civil and political rights as well

as economic, social, and cultural rights. The first of these—the civil and political rights—are

based on the traditional Western civil liberties and political rights derived from the English Bill of

Rights of 1689, the French Declaration of the Rights of Man and Citizen of 1789, the U.S. Bill of

Rights of 1790, and similar instruments. The economic, social, and cultural rights were included

at the insistence of the Soviet Union, its allies, and other non-Western countries.

The economic, social, and cultural rights listed in the Universal Declaration of Human Rights

include many provisions dealing with the rights of laborers. These include:

Freedom of assembly.

Not to be enslaved.

Not to be subjected to torture.

Not to be compelled to belong to an association.

Right to social security.

Right to work.

Right to just and favorable pay.

Right to form and join trade unions.

Right to rest and leisure.

Right to a reasonable standard of living.

Right to education.

Services and Labor

Legal Effect of the Universal Declaration of Human Rights: The Universal Declaration is not a

treaty—it is a “declaration” about the rights humans should enjoy. From its beginnings, however,

commentators have argued at length about whether or not it constitutes “customary international

law.”

Among the most influential case decisions supporting the idea that the Universal Declaration is a

statement of customary international law is the U.S. Second Circuit Court of Appeals case of

Filartiga v. Pena-Irala.

One interesting legal issue in the United States is whether a violation of the protections of the

UDHR can serve as evidence that the “law of nations” has been violated in order to provide

jurisdiction in U.S. federal courts under the Alien Tort Claims Act (ATCA). The ATCA provides

both subject-matter jurisdiction and a cause of action. To state a claim under the ATCA, a plaintiff

must allege (1) a claim by an alien, (2) alleging a tort, and (3) a violation of the “law of nations”

(international law).

One case that generated much interest in the United States a few years ago involved a claim by

several citizens of Myanmar (formerly known as Burma) that they had been subject to physical

harm and rape and forced into laboring on the construction of a pipeline for Unocal Corp. by the

national army of Myanmar. The parties did not dispute that the first two elements of the ATCA

were satisfied.

The Filartiga [v. Pena-Irala] decision was the first Circuit decision interpreting the ATCA.

“Construing this rarely-invoked provision, the Court held that deliberate torture perpetrated under

color of official authority violates universally accepted norms of international law of human

rights.” A few years later, the 2nd Circuit’s decision in Kadic [v. Karadzic] provided a further

analysis of the scope of the private individual’s liability for violations of international law.

“The ‘color of law’ jurisprudence of United States Code, title 42, §1983, is often used as a

relevant guide to whether a defendant has engaged in official action for purposes of jurisdiction

under the Alien Tort Claims Act.” In the Unocal case, the plaintiffs argued that the joint venture

between Unocal and the Myanmar government constituted sufficient “color of law” to create

liability. To answer the liability question, the court examined whether state officials and private

parties had acted in concert in effecting a particular deprivation of constitutional rights.”

Individual liability under the ATCA may be established for acts rising to the level of slavery or

slave trading. The Unocal plaintiffs contended that forced labor was “modern slavery” and was

therefore one of the “handful of crimes” to which individual liability under the ATCA may attach.

Over the past 40 years, the ILO has repeatedly condemned Burma’s record of imposing forced

labor on its people. In 1996, the ILO established a Commission of Inquiry to investigate

allegations concerning Burma’s noncompliance and, in 1998, the Commission issued its report,

which acknowledged that the definition of slavery has historically been a narrow one, but that the

term “slavery” now encompasses forced labor.

The court found ample evidence in the record linking the Myanmar government’s use of forced

labor to human rights abuses. The court found that there were no facts suggesting that Unocal

sought to employ forced or slave labor. In fact, Unocal expressed concern that the Myanmar

government was utilizing forced labor in connection with the Project and the military made

efforts to conceal its use of forced labor. Because such a showing was insufficient to establish

Services and Labor

liability under international law, the court found there was no valid claim against Unocal for

forced labor under the ATCA.

Later Developments Regarding the Unocal Case and Other Recent Alien Tort Claims Act Cases

The Unocal case was appealed to the Ninth Circuit Court, where the lower court’s dismissal of

Unocal was reversed and the case remanded for a full trial. The appellate court issued a strong

decision, finding that if the plaintiff’s allegations were proved, Unocal could be held liable under

the ATCA both for its own actions and for “aiding and abetting” violations by the Myanmar

military and government.

In addition, whereas the lower court found that Unocal had not engaged in “state action,” the

appellate court held that although “acts of rape, torture, and summary execution,” like most

crimes, “are proscribed by international law only when committed by state officials or under color

of law,” to the extent that they were committed in isolation, these crimes “are actionable under the

Alien Tort Claims Act, without regard to state action, to the extent that they were committed in

pursuit of genocide or war crimes.”

However, Unocal asked for, and was granted, a rehearing before the Ninth Circuit Court en banc

(all judges participating). The U.S. Supreme Court finally did accept a case involving the ATCA

and issued its long-awaited opinion in Sosa v. Alvarez Machain in June 2004.

Although the Sosa case did not directly involve any transnational corporations, the rationale and

holding of this case will no doubt be most important in all future cases against such business

entities concerning human rights abuses. It would appear that the judiciary should proceed slowly

and carefully in recognizing any specific obligatory international norms, which may give rise to

private actions under the ATCA.

In 2011 the United Nations Human Rights Council endorsed a new set of “Guiding Principles for

Business and Human Rights.” The principles consist of 30 recommendations designed to spell out

the responsibilities of corporations and other business associations. The new standards outline

how states and businesses should implement the UN’s “Protect, Respect and Remedy” framework

in order to better manage and remedy human rights challenges.

International Covenant on Economic, Social, and Cultural Rights

The International Covenant on Economic, Social, and Cultural Rights was adopted by the UN

General Assembly on December 18, 1966. It entered into force on January 3, 1976. As of April

2012, there were 193 parties to the Covenant. The United States signed the treaty in 1977, but the

Senate has so far failed to ratify it.

The covenant implements the rights set out in the Universal Declaration of Human Rights and

gives them the binding force of treaty law. The extent to which the provisions apply, however,

varies from country to county. Article 2(1) provides: “Each State Party to the present Covenant

undertakes to take steps, individually and through international assistance and cooperation,

especially economic and technical, to the maximum of its available resources, with a view to

achieving progressively the full realization of the rights recognized in the present Covenant by all

appropriate means, including in particular the adoption of legislative measures.”

Regional Intergovernmental Regulations on Labor

Services and Labor

Workers’ rights are protected by a variety of regional intergovernmental organizations.

Employment Laws in the EU – The freedom of movement of workers between the now 27

member states of the EU is a basic tenet in the treaties that constitute the fundamental instruments

creating the Union. The European Atomic Energy Community forbids any restrictions based on

nationality in the employment of qualified workers in the atomic energy industry. The Treaty

Establishing the European Community (EC Treaty) provides that “freedom of movement for

workers shall be secured” within the EU.

Article 39 of the EC Treaty allows workers, no matter what their occupations, to accept offers of

employment and to remain in any member state to carry out that employment. Article 40

authorizes the EU Council to remove and harmonize administrative procedures that obstruct the

free movement of workers and to set up the machinery necessary to match job hunters in one state

with job offers in another. Article 42 grants the EU Council the power to “adopt such measures in

the field of social security as are necessary to provide freedom of movement for workers.”

In 1968, the Council of Ministers enacted Directive 68/360 to implement the EC Treaty

Provisions on the free movement of workers. The directive guarantees workers (and their

families) the right to leave their own country and to enter any other member state both to take up

and to search for a job.

A foreign worker is entitled to “enjoy the same social and tax advantages as national workers”

and to “enjoy all the rights and benefits accorded to national workers in matters of housing,

including the ownership of the housing he needs.” Foreign workers may not be treated differently

in the manner in which they are dismissed or in their “reinstatement or reemployment” if they

have become unemployed.

The right of workers to move freely across the borders of EU member states is subject to three

broad limitations: Travel can be denied on the grounds of public policy, public security, and

public health. However, these limitations apply only to the right to enter or leave a member state,

not to the right of equal treatment once a worker has been admitted to a state.

A final limitation to the free movement of workers is found in a clause in Article 39 of the EC

Treaty stating that the “provisions of this Article shall not apply to employment in the public

service.” This does not mean that foreign nationals are forbidden from working in any job in the

public service, nor does it allow discrimination in the terms and conditions of employment once a

worker has been hired. The public service limitation applies only to jobs that are related to the

activity of governing.

Employment Standards of the Organization for Economic Cooperation and Development

(OECD) – The mission of the OECD is to promote policies that will improve the economic and

social well-being of people around the world. The OECD has worked to better the working

standards of laborers.

“To encourage the positive contributions” of multinational enterprises, “to minimize and resolve

the difficulties” that can arise out of their operations, and “to contribute to improving the foreign

investment climate” are part of the OECD’s Guidelines for Multinational Enterprises. The

Guidelines contain one section called “Employment and Industrial Relations,” which establishes

norms for the employment of workers in both home and host countries. Although the guidelines

Services and Labor

are only voluntary, they have had some influence because they establish, in essence, minimum

international standards.

Protection of Workers’ Rights by the Council of Europe – The Council of Europe is

responsible for enforcing the European Convention on Human Rights of 1950 and the European

Social Charter of 1961. The Human Rights Convention is concerned mainly with civil and

political rights, whereas the Social Charter deals primarily with economic, social, and cultural

rights.

As part of its guarantee of freedom of assembly, the Human Rights Convention includes the right

to join a trade union. Much broader provisions protecting the rights of workers are found in the

European Social Charter. Part I lays out, in general terms, the “rights and principles” that the

charter aims to protect. Part II contains articles describing in detail these rights and principles.

Part III sets out the specific obligations that the contracting parties must undertake after ratifying

the charter.

Transnational Organized Labor – Transnational labor unions, with the ability to represent

employees across international boundaries, can exist only where IGOs have the power to sanction

them. Both the EU and the Council of Europe have such power. Although the EU has yet to

authorize the establishment of any transnational labor unions, the Council of Europe’s European

Social Charter specifically provides for them.

Several transnational labor organizations have been set up as coordinating bodies by municipal

labor unions. They are designed to encourage cooperative action, to support national

organizations, and to advocate the rights of workers before regional IGOs. Two reasonably

successful examples are the International Secretariat of the World Auto Council and the European

Confederation of Trade Unions. Transnational labor organizations have also been actively

involved in collecting and disbursing solidarity funds to support national labor actions.

Movement of Workers

The Universal Declaration of Human Rights states that “everyone has the right to leave any

country, including his own, and to return to his country.” This is not, however, the generally

accepted rule in international law today. Many countries require that their citizens have a passport

and permission from the government before traveling abroad.

The EU requires its member states to issue and renew passports valid for travel throughout the

EU, and it forbids member states from requiring exit visas or equivalent documents for travel to

other EU member states. To the extent that the EU rules do not apply (i.e., to travel outside the

Union), U.K. law still regards the issuance of a passport as a matter of “royal prerogative.”

Case 8-3: State v. Nagami

Facts: Akie Nagami, a Japanese national, wanted a Japanese passport so that she could visit

China with her husband, Earle L. Reynolds, an American national. Japan refused to give her the

passport, so she departed from Japan without a passport. The Nagasaki harbor police arrested

Nagami and Reynolds, charging her with leaving the country without a valid passport, and him

with being an accessory.

Issue: Does Japan’s passport law violate the Japanese constitutional guarantee of freedom of

travel?

Services and Labor

Holding: No.

Law: The Passport Law allows the Foreign Minister to deny a passport to anyone wishing to

Explanation: While it is difficult for a person wishing to visit China to first obtain an entrance

Order: Nagami and Reynolds were guilty of violating the provisions of Japan’s Passport Law.

Visas – Visas are a host state’s counterpart of the passport. They grant permission for an alien to

enter a country. As with passports, issuance is discretionary with the host state, and both the

length of time that an alien may stay in a country and the activities the alien may carry on while

there can be limited.

With respect to their duration, visas are classified as either temporary or permanent. An alien who

receives a temporary visa is expected to leave the country after a stated time period. An alien who

receives a permanent visa is allowed to stay indefinitely, and often an alien who seeks a

permanent visa is expecting to apply for nationalization.

An alien who wishes to obtain a visa must go to a state’s overseas embassies or consulates and

make an application before traveling to the state. An alien who is already inside a host state and

has questions about his/her visa or wants to change from one kind of visa to another needs to

contact the state’s immigration service. Some countries, especially developing countries, allow

aliens to obtain a visa upon their arrival in the country. When this is the case, aliens have a duty to

contact the immigration service within a reasonable period of time to obtain a visa.

Temporary Visas

Most countries’ immigration laws establish many categories of temporary visas, reflecting the

many different activities that aliens may carry on while temporarily residing in a host country.

The most common temporary visas are visitor visas for tourists. Tourists ordinarily have to apply

for a visa at an overseas embassy or consulate of the country they intend to visit. Many countries,

however, have a Visa Waiver Program (VWP) that allows tourists from designated countries

(usually countries with a reciprocal arrangement) to enter without a visa.

Another common temporary visa is given to business visitors. Most countries allow business

visitors to enter for short-term visits (typically for no more than six months) to contact customers,

attend trade shows and conventions, show samples, take orders, and engage in other business

activities. They must be acting on behalf of a foreign firm, however, and not working for a local

employer.

Services and Labor

Most developed countries have a special category of visa for students. To qualify, students

typically must obtain a statement in advance from the educational institution showing that they

have been admitted to a course of study. They also need to prove that they have sufficient

resources to cover their course of study and to return home upon its completion. Some countries

allow students to work on campus, but many do not.

Other important temporary visas are those given to temporary employees and the intracompany

transferees of multinational enterprises. Typically, these visas are granted only on the petition of

an employer, and an alien who has such a visa and changes jobs must get the new employer to

apply for a new visa.

Permanent Visas

All states limit the number of permanent visas that they grant to immigrants. This is because they

want to ensure that the persons who are granted permanent visas will contribute to the state’s

society and will not be a burden on it. States typically establish a scheme that gives certain classes

of persons a priority claim to visas with permanent immigrant status and that limits the total

number of aliens who may enter from particular foreign countries.

Compliance with Visa Obligations

Aliens are obliged to comply with the terms of their visas and to leave a country when their visa

expires or when it is withdrawn. Moreover, the issuance or denial of a visa, the extension or the

refusal to extend an existing visa, and the revocation of a visa are all matters of executive

discretion. As a consequence, such decisions are noncontestable in the courts of most countries.

Case 8-4: England and Another v. Attorney-General of St. Lucia

Facts: The Prime Minister of St. Lucia informed Mr. and Mrs. England, residents of St. Lucia but

nationals of the U.K., that his government had information that Mr. England had helped political

extremists recruit St. Lucians for terrorist training in Libya. Mr. England, through his solicitor,

asked to present his side of the matter before any action was taken. The government did not give

him the opportunity. By orders made by the governor-general in Council, Mr. and Mrs. England

were declared prohibited immigrants and ordered to leave St. Lucia. The Englands filed motions

to challenge these orders.

Issue: Can the courts review the action taken by the Governor-General in Council?

Holding: No.

Law: In 1983, St. Lucia had repealed those provisions of its Immigration Ordinance that created

Explanation: The Governor-General acted solely under executive powers and in no sense as a

Order: Appeal dismissed.

Services and Labor

Regulation of Foreign Workers – Aliens who enter a country to work must obtain an

appropriate entry visa (i.e., one that allows them to be gainfully employed), and they must

comply with the host state’s employment laws.

Commonly, the same labor laws that apply to nationals govern foreign workers once they are

allowed to enter a country. This is often so even when a foreign worker and a foreign employer

agree to abide by the labor laws of their home state.

Many states impose special rules on foreign workers. Some use percentile legislation to ensure

that a certain percentage of the local workforce is made up of nationals. Others limit the benefits

that foreign employees can be given.

Sometimes the rules governing foreign workers seem to grant them special privileges. This seems

especially to be the case when the rules are set out in a treaty. Treaties called “Friendship,

Commerce, and Navigation” commonly establish a reciprocal right for the national businesses of

either signatory state to employ certain categories of their national workers within the territory of

the other state. On its face, this provision allows a foreign business to discriminate in favor of its

national employees by assigning its nationals to senior executive positions and by denying

promotions to employees in the host state.

Foreign employers and foreign workers are both subject to the employment laws of the host state

unless a treaty or domestic law clearly and specifically provides otherwise.

Case 8-5: Spiess et al. v. C. Itoh & Co. (America), Inc.

Facts: C. Itoh & Co. America (Itoh-A) is a New York corporation that is a wholly owned

subsidiary of C. Itoh & Co., Ltd., of Japan (Itoh-J). Employees of Itoh-A filed a suit complaining

Issue: Does the FCN exempt an American subsidiary of a Japanese corporation from the

provisions of the CRA?

Holding: No.

Law: (1) The FCN provides that “nationals and companies of either party” have the right to

Explanation: Itoh-A’s contention that the U.S. State Department Guidelines for determining

Order: Itoh-A’s motion to dismiss the suit is denied.

Services and Labor

Application of Home State Labor Laws Extraterritorially – Traditionally, countries have

refused to apply their labor laws extraterritorially. This principle is based on the concept of

sovereignty, by which each nation is independent, and not subject to the laws of other nations.

Even though the U.S. Supreme Court ordinarily assumes that the U.S. Congress does not intend

for its legislation to apply extraterritorially, it does recognize that Congress “has the authority, in

certain cases, to enforce its laws beyond the territorial boundaries of the United States.” And

Congress has enacted labor–related laws that expressly apply extraterritorially, including the

antidiscrimination provisions of Title VII of the Civil Rights Act of 1964 and the Americans with

Disabilities Act of 1990, which apply to American citizens working for American employers

overseas.

Case 8-6: Morelli v. Cedel

Facts: Ida Morelli, age 54, who worked for Cedel, a Luxembourg bank in its New York branch,

was asked to resign and to sign an agreement renouncing all claims against Cedel. She signed

under the threat that she would be denied benefits, including her pension. She never received her

pension. She then sued, relying on the U.S. Age Discrimination in Employment Act of 1967

(ADEA). Cedel countered that it was exempt from the application of the ADEA because it was a

foreign employer and its New York branch had fewer than 20 employees. The trial court held in

favor of Cedel and Morelli appealed.

Issues: (1) Does the ADEA apply to a U.S.-based branch of a foreign employer? (2) Are

foreign-based employees to be counted in determining whether a U.S.-based branch of a foreign

employer is subject to the ADEA?

Holdings: (1) Yes. (2) Yes.

Law: ADEA §4(h)(2) states that its prohibitions “shall not apply where the employer is a foreign

Explanation: Section 4(h)(2) was added to the ADEA in 1984 to make sure that it only applied to

American employers operating outside the U.S. and that it did not apply to foreign employers

Order: Judgment vacated and case remanded.